International Tax and Public Finance

, Volume 21, Issue 5, pp 923–954

Cooperation in environmental policy: a spatial approach

Article

DOI: 10.1007/s10797-013-9280-1

Cite this article as:
Davies, R.B. & Naughton, H.T. Int Tax Public Finance (2014) 21: 923. doi:10.1007/s10797-013-9280-1

Abstract

Inefficient competition in emissions taxes for foreign direct investment creates benefits from international cooperation. In the presence of cross-border pollution, proximate (neighboring) countries have greater incentives to cooperate than distant ones as illustrated by a model of tax competition for mobile capital. Spatial econometrics is used to estimate participation in 110 international environmental treaties by 139 countries over 20 years. Empirical evidence of increased cooperation among proximate countries is provided. Furthermore, strategic responses in treaty participation vary across country groups between OECD and non-OECD countries and are most evident in regional agreements.

Keywords

Environmental agreementsForeign direct investmentSpatial econometrics

JEL Classification

F53Q58

Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.School of EconomicsUniversity College DublinBelfield, Dublin 4Ireland
  2. 2.Department of EconomicsUniversity of MontanaMissoulaUSA