16,342 research outputs found

    Differentiation of Green Taxes: A Political-Economy Analysis for Germany

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    In this paper we study political-economy determinants of the differentiation of environmental taxes between sectors. Using a common-agency model, we provide predictions on tax differentiation which are then tested using data from the German Ecological Tax Reform. As the reform is revenue neutral and reduces labor costs, tax differentiation is not only determined by the activity of lobby groups favoring reduced tax rates, but also by the groups? interest in revenue rebates to labor. Empirical data underpin our theoretical findings: A regression analysis of Germany?s green tax reform explains environmental tax differentiation by the presence of sectoral interest groups. Besides market concentration and energy demand elasticities, the exposure of industries to international trade flows plays an important role in the environmental tax design. --environmental tax reform,interest groups,common agency

    Public Interest vs. Interest Groups: Allowance Allocation in the EU Emissions Trading Scheme

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    This paper presents a political-economy analysis of allowance allocation in the EU Emissions Trading Scheme (EU ETS). A common-agency model suggests that a politicalsupport maximizing government considers the preferences of sectoral interest groups besides public interest when allocating emissions permits. In the stylized model, industries represented by more powerful lobby groups face a lower regulatory burden, which for sufficiently high lobbying power leads to an inefficient emissions regulation. An empirical analysis of the first trading phase of the EU ETS corroborates our theoretical prediction for a cross-section of German firms, but also shows that the political-economy determinants of permit allocation depend on firm characteristics. We find that large carbon emitters that were heavily exposed to emissions regulation and simultaneously represented by powerful interest groups received higher levels of emissions allowances. In contrast, industrial lobbying power stand-alone or threats of potential worker layoffs did not exert a significant influence on the EU ETS allocation process. --Emissions trading,interest groups,regression analysis

    Capital mobility, tax competition, and lobbying for redistributive capital taxation

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    This paper analyzes the impact of international capital mobility on redistributive capital taxation and on lobbying activities by interest groups. It employs a model where different capital endowments lead to a conflict between households concerning their most preferred capital tax rate. Three main results are derived: First, redistributive source based capital taxes or subsidies decline as international tax competition intensifies. Second, lobbying activities of certain interest groups may explain international differences in the capital tax rate. Third, capital mobility may lead to declining lobbying activities of interest groups and thus may be welfare increasing for all households.Tax competition,interest groups,redistribution

    Protectionists, environmentalists, and the formation of environmental policy in an open economy

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    In situations where the traditional instruments of trade policy are not available, protection for import-competing industries can be given only indirectly. One of the candidates of giving indirect subsidies is environmental regulation. The competitiveness of a domestic industry can be improved by low emission taxes, by low environmental taxes on the consumption of the industry's output, or by low quality standards that have to be met by the goods that are produced by this industry. The paper looks at these instruments in a partial-equilibrium setting. There are a domestic and a foreign industry that produce goods that are regarded as imperfect substitutes by the consumers. Firms are price takers. The government has five policy instruments at its disposal: the emission tax rate, taxes on the consumption of domestic and foreign goods, and environmental-quality standards for domestic and foreign goods. In a first step, the small-country case is addressed. Two lobby groups that are interested in influencing environmental policies are considered: the owners of an industry-specific factor and environmentalists. The process of regulatory capture is modelled via a poMcal-supportfunctLon approach. Two cases are distinguished. First, the lobbies capture only single policy instruments. Second, they capture environmental policy as a whole. It is seen that some counter-intuitive results turn up, and this is explained by the fact that lobbies and policy makers are interested in providing protection in the most efficient way. Then we look at the largecountry case where environmental policies affect the terms of trade. It is seen that regulatory capture may lead to welfare gains since lobbies sometimes happen to internalise part of the external effects arising in the international policy game.

    Cross-Border Political Donations and Pareto-Efficient Tariffs

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    This paper examines the effects of lobbying activities across international borders, on determining each country’s import tariff in a multi-principal, multi-agent, menu-auction model. Cross-border political donations could promote international policy cooperation because of two of their distinctive characteristics. First, special interest groups use cross-border donations as tools to wield their influence on ruling parties of other countries directly, which promotes efficiency of policy formation. Second, for ruling parties of countries, cross-border donations make them take into account the impact of their policy on other countries, which makes them more sensitive to other countries’ welfare and, therefore, more cooperative with others. When ruling parties estimate the worth of political contributions from national special interest groups and from foreign lobbying groups with the same weight, Pareto-efficient tariffs are attained at which world welfare is maximized.Cross-border Donations, Truthful Equilibrium, Pareto-Efficient Tariffs

    Political Economy of Endogenous Growth (Revised)

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    Using an endogenous growth framework, this paper analyzes the impact of lobbying for public goods on the long run steady-state growth rate of the economy. A socially optimal level of lobbying can be found to exist in the absence of a social planner. Atomistic households, however, exceed this level by viewing taxes as fixed, ignoring the aggregate tax impact of lobbying via increased public expenditures. Two extensions are presented. In one, anti-tax lobbying is analyzed, drawing parallel results. In another, a quasi-public good is introduced, lobbying for which is based not on altruism, but on private gains, though public gains occur as a side effect.Political Economy,

    Environmental legislation and the impact of lobbying activities

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    The paper is concerned with effects of lobbying activities by political pressure groups that wish to affect environmental legislation. Two interest groups are considered, environmentalists on the one hand and a polluters' lobby on the other. These two groups can influence the environmental policy in two ways. First, they support those political parties that promise to implement their favoured kind of environmental regulation. This support has an impact on election probabilities and, therefore, on the environmental policy measures implemented by the new government. The second way of influencing political decisions is to exert pressure on an existing government. These two approaches are used in the paper to address the questions of how environmental quality is affected by lobbying activities and how large the resource waste due to lobbying is.

    Corruption, Political Competition and Environmental Policy

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    There is a growing literature on the causes and consequences of corruption. A common and often unsubstantiated assertion is that countries which exhibit a low level of political competition are more likely to suffer higher levels of corruption. In this paper we examine the effects of corruption on environmental policy under varying degrees of political competition. An important feature of the model, which has been neglected in the existing literature, is that corruption may occur at different levels of government, such as the payment of bribes to politicians who determine policies, or bureaucrats who administer environmental regulations. We analyse the relationship between political competition and environmental outcomes in a model of stratified corruption and identify the benefits and limits of political competition. Our results suggest that while political competition may yield policy improvements, it cannot eliminate corruption at all levels of government.corruption, lobbying, political competition, regulatory compliance, bribery

    Why the Weak Win: The Strategic Role of Investment in Lobbying

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    Recent empirical work suggests that old er and less efficient industries are typically more successful at securing trade protection and income support. Similarly, environmentally damaging industries often lobby effectively for less stringent environmental regulations. This paper explains the lobbying success of these industries in terms of strategic role of investment as a credible commitment device.trade policy; interst groups; investments; industry

    The European Union’s Emission Trading Scheme : Political Economy and Bureaucratic Rent-Seeking

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    A political economy model is presented that proposes an effective explanation as to why national allocation plans in the emissions trading scheme of the European Union have taken the form they have. The influence of the national bureaucracy, which is omitted in the majority of the related political economy literature, is shown to be potentially significant and costly – particularly through its interaction with the influence of the affected industrialists. The analysis suggests that the role of the national bureaucracy in the design of environmental policy should be carefully considered and structured, and suggests an avenue of potentially important and fruitful future research.
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