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Shadow prices, environmental stringency and international competitiveness
van Soest,D.P. List,J.A. Jeppesen,T.
van Soest,D.P.
List,J.A.
Jeppesen,T.
Abstract
Empirical tests of the relationship between international competitiveness and the severity of environmental regulations are hampered by the lack of pollution abatement cost data for non-U.S. countries. The theory of the firm suggests that environmental stringency can be measured by the difference between a polluting input's shadow price and its market price. We make a first attempt at quantifying such a measure for two industries located in nine European OECD countries. Overall, we provide (i) a new approach to measure cross-country regulatory differences in that we use a theoretically attractive measure of industry-specific private compliance cost, and (ii) empirical estimates that are an attractive tool for researchers and policymakers who are interested in examining how economic activity is influenced by compliance costs.
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Date
2006
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Keywords
Cross-country environmental regulation, Interjurisdictional competition, H73 - Interjurisdictional Differentials and Their Effects, Q28 - Government Policy, R38 - Government Policy, SDG 8 - Decent Work and Economic Growth
Citation
van Soest, D P, List, J A & Jeppesen, T 2006, 'Shadow prices, environmental stringency and international competitiveness', European Economic Review, vol. 50, no. 5, pp. 1151-1167. https://doi.org/10.1016/j.euroecorev.2005.02.002