Cross-country Emission Tax Effect Of Mergers
Abstract
Recent studies show that mergers among polluting firms could affect the regulatory landscape of the industry and trigger a policy change. Using a two-country model, this study examines the effect of a merger size, as measured by the number of merging firms, on the optimal emission tax of another country. We show that, if pollution damages are not too large, a decline in the size of a merger reduces production and profits in that country, which affords a larger tax in the other country due to smaller profit-shifting concerns. On the other hand, if pollution damages are extremely large, a reduction in the size of a merger in one country reduces production in that country, but it also reduces production and emissions in the other country. Thus, the latter can induce a smaller emission tax. The change in the emission tax in both scenarios is consistent with cooperative outcomes.
Recommended Citation
Fikru, M. G., & Gautier, L. (2023). Cross-country Emission Tax Effect Of Mergers. Arthaniti: Journal of Economic Theory and Practice, 22(1), pp. 113-128. SAGE Publications.
The definitive version is available at https://doi.org/10.1177/0976747920958094
Department(s)
Economics
Keywords and Phrases
cooperative emission tax; Merger and acquisition; non-cooperative emission tax; product differentiation; trans-boundary pollution
International Standard Serial Number (ISSN)
2517-2654; 0976-7479
Document Type
Article - Journal
Document Version
Citation
File Type
text
Language(s)
English
Rights
© 2023 Sage, All rights reserved.
Publication Date
01 Jun 2023
