International Tax and Public Finance

, Volume 21, Issue 5, pp 923-954

First online:

Cooperation in environmental policy: a spatial approach

  • Ronald B. DaviesAffiliated withSchool of Economics, University College Dublin Email author 
  • , Helen T. NaughtonAffiliated withDepartment of Economics, University of Montana

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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.


Environmental agreements Foreign direct investment Spatial econometrics

JEL Classification

F53 Q58