Vertical Structure and Strategic Environmental Trade Policy

20 Pages Posted: 20 Nov 2001

See all articles by Stephen F. Hamilton

Stephen F. Hamilton

University of Central Florida - College of Business Administration - Department of Economics; University of Arizona - Department of Agricultural and Resource Economics

Till Requate

University of Kiel - Department of Economics

Date Written: October 2001

Abstract

The idea that environmental trade policy may be used to achieve competitive advantage in international markets has important implications for the way we conceive tree-trade. This paper reconsiders the issue of strategic environmental policy in a model that makes explicit the vertical structure that supports production of the traded good. We find these intranational vertical relationships to have a substantial qualitative effect on the optimal strategic environmental trade policy. We show that under both quantity and price competition in the international market, the optimal policy to levy on the polluting input when vertical contracts are allowed is a Pigouvian tax.

Keywords: Strategic Trade, Vertical Contracts, Environmental Policy

JEL Classification: F12, F18, H21

Suggested Citation

Hamilton, Stephen F. and Requate, Till, Vertical Structure and Strategic Environmental Trade Policy (October 2001). Available at SSRN: https://ssrn.com/abstract=289079 or http://dx.doi.org/10.2139/ssrn.289079

Stephen F. Hamilton

University of Central Florida - College of Business Administration - Department of Economics ( email )

Orlando, FL 32816-1400
United States

University of Arizona - Department of Agricultural and Resource Economics ( email )

1110 E. North Campus Drive
Tucson, AZ 85721-0023
United States
520-621-6255 (Phone)
520-621-6250 (Fax)

Till Requate (Contact Author)

University of Kiel - Department of Economics ( email )

Olshausenstrasse 40
24098 Kiel, 24098
Germany
+49 431 880-4424 (Phone)
+49 431 880-1618 (Fax)

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