Locational Competition and the Environment: Should Countries Harmonize Their Environmental Policies?
Document Type
Discussion Paper
Publication Date
9-1-2004
CFDP Number
1079
CFDP Pages
36
Abstract
In debates about economic unification or trade liberalization, it is often asked whether harmonization should go beyond taxes and macroeconomic policies to include regulations, particularly environmental policy. This issue also arises when countries, states, and cities engage in competition for plants, jobs, or exports in what we might call “locational competition.” This essay analyzes locational competition with particular reference to environmental policy. The conclusions are the following: First, economic efficiency requires harmonization of policies for global environmental issues; second, for local public goods or externalities, there is a strong presumptive case against harmonization; and finally that a competitive “race to the bottom” in environmental policies is inconsistent with countries’ following their own economic self-interests.
Recommended Citation
Nordhaus, William D., "Locational Competition and the Environment: Should Countries Harmonize Their Environmental Policies?" (2004). Cowles Foundation Discussion Papers. 1322.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/1322