Environmental and Resource Economics

, Volume 67, Issue 4, pp 701–724 | Cite as

The Spillover Effects of Good Governance in a Tax Competition Framework with a Negative Environmental Externality



We investigate the impact of a political regime shift affecting consumers, business interests and lobby contributions when countries engage in tax competition in capital and a polluting resource. When consumers have more influence than resource owners, the resource tax rate and public spending rise while environmental damages, lobbying contribution, and the capital tax rate fall. This response can spillover to other countries leading to lower welfare. Capital tax harmonization improves welfare of consumers and resource owners. Resource tax harmonization and governance harmonization both reduce the influence of lobbying and improve consumer welfare but resource owners are worse off.


Lobbying Environmental damage Tax competition  Spillovers 

JEL Classification

H23 D73 



We are grateful to Hayley Chouinard who provided comments on an earlier version of this manuscript and two reviewers who helped clarify some implications from our model.

Supplementary material

10640_2015_9995_MOESM1_ESM.pdf (23 kb)
Supplementary material 1 (pdf 22 KB)


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Copyright information

© Springer Science+Business Media Dordrecht 2016

Authors and Affiliations

  1. 1.School of Economic SciencesWashington State UniversityPullmanUSA

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