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Trade, Transport Emissions and Multimarket Collusion with Border Adjustments

Sikdar, Shiva

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Abstract

We analyze the impact of border adjustment policies on trade, pollution and welfare when firms, located in different countries, sell differentiated products in geographically-separated markets. Transportation of goods not only incurs a cost, but also generates emissions. We compare outcomes under competition and multimarket collusion. Cooperating governments can implement the first-best using appropriate border adjustments regardless of the market structure. When governments set policies non-cooperatively, the border adjustment tariffs exceed the marginal damage from emissions. While it is expected that colluding firms would reduce trade flows relative to competition, trade increases under collusion, resulting in higher welfare. This highlights the possibility of allowing firms to collude and taxing (part of) their profits, which can be redistributed to citizens or used to mitigate the effects of pollution.

Journal Article Type Article
Acceptance Date Jun 28, 2023
Online Publication Date Aug 31, 2023
Publication Date 2023-11
Deposit Date Jul 21, 2023
Publicly Available Date Sep 1, 2023
Journal Environmental and Resource Economics
Print ISSN 0924-6460
Electronic ISSN 1573-1502
Publisher Springer Verlag
Peer Reviewed Peer Reviewed
Volume 86
Issue 3
Pages 407-432
DOI https://doi.org/10.1007/s10640-023-00799-x
Keywords F18, H23, Transport pollution, Q56, Differentiated goods, D43., Cross-hauling, Strategic government policy, Border adjustments, L41, L13, Multimarket collusion

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Copyright Statement
Open Access This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/.




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