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http://hdl.handle.net/10419/43502
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| Title: | | The impact of unilateral climate policy with endogenous plant location and market size asymmetry  |
| Authors: | | Sanna-Randaccio, Francesca Sestini, Roberta |
| Issue Date: | | 2010 |
| Series/Report no.: | | Nota di lavoro // Fondazione Eni Enrico Mattei: Sustainable development 2010,107 |
| Abstract: | | This paper analyses the impact of unilateral climate policy on firms' international location strategies in emission-intensive sectors, when countries differ in terms of market size. The cases of partial and total relocation via foreign direct investment are separately considered. A simple international duopoly model highlights the differences between short-term and long-term effects. In the short-term no change in location is a likely outcome in very capital-intensive sectors, and when there is a strategy shift this takes the form of partial instead of total relocation. In the long-run total relocation becomes a feasible outcome. However we found that, when tighter mitigation measures are introduced by the larger country and unit transport cost is high, with a pronounced market asymmetry the probability of firms not relocating abroad is high even in the long-term. The welfare implications of unilateral environmental measures are assessed considering global industrial pollution and accounting for shifts in location strategy. |
| Subjects: | | Foreign Direct Investment Carbon Leakage Climate Policy Relocation Transport Costs Welfare |
| JEL: | | F12 F23 Q58 |
| Document Type: | | Working Paper |
| Appears in Collections: | | FEEM Working Papers, Fondazione Eni Enrico Mattei
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