The role of government commitment for environmental policy and capital movements

Marsiliani, L.; Renström, TI.

doi:10.2202/1534-5998.1229

The role of government commitment for environmental policy and capital movements

Marsiliani, L.; Renström, TI.

Authors

Professor Laura Marsiliani laura.marsiliani@durham.ac.uk
Professor

Dr Thomas Renstrom t.i.renstrom@durham.ac.uk
Associate Professor

Abstract

This paper explores the relationship between environmental protection and international capital movements, when tax policy is endogenous (through voting). A two-period general equilibrium model of a small open economy is specified to compare the effects of two different constitutions (commitment or no commitment in tax policy), as well as income inequality. Under the commitment regime, the equilibrium is characterised by a lower labour tax, higher environmental tax and less capital locating abroad than in the no-commitment equilibrium. Furthermore, given the degree of commitment, more equal societies are characterised by tougher environmental policy and less capital locating abroad.

Citation

Marsiliani, L., & Renström, T. (2006). The role of government commitment for environmental policy and capital movements. BE Journal of Macroeconomics, 6(3), Article 8. https://doi.org/10.2202/1534-5998.1229

Journal Article Type	Article
Online Publication Date	Jan 20, 2007
Publication Date	2006-11
Deposit Date	Aug 18, 2008
Publicly Available Date	Aug 18, 2008
Journal	BE Journal of Macroeconomics
Publisher	De Gruyter
Peer Reviewed	Peer Reviewed
Volume	6
Issue	3
Article Number	8
DOI	https://doi.org/10.2202/1534-5998.1229
Keywords	Time consistency, Taxation, Environmental policy, Political economy, International.
Public URL	https://durham-repository.worktribe.com/output/1578017