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The role of government commitment for environmental policy and capital movements.

Marsiliani, L. and Renström, T. I. (2006) 'The role of government commitment for environmental policy and capital movements.', B.E. journal of macroeconomics., 6 (3). p. 8.


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.

Item Type:Article
Keywords:Time consistency, Taxation, Environmental policy, Political economy, International.
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Publisher statement:Copyright © 2007 The Berkeley Electronic Press. All rights reserved.
Date accepted:No date available
Date deposited:18 August 2008
Date of first online publication:20 January 2007
Date first made open access:08 February 2022

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