International Tax and Public Finance

, Volume 20, Issue 3, pp 434-449

First online:

Open Access This content is freely available online to anyone, anywhere at any time.

Tax competition leading to strict environmental policy

  • Cees WithagenAffiliated withDepartment of Spatial Economics, VU University Amsterdam Email author 
  • , Alex HalsemaAffiliated withCentre for World Food Studies, VU University Amsterdam


We study tax competition when pollution matters. Most notably, we present a dynamic setting, where the supply of capital is endogenous. It is shown that tax competition may involve stricter environmental policy than the cooperative outcome.


Environmental policy Race to the bottom Pollution taxation

JEL Classification

Q58 H23