I am grateful to editor Professor John P. Conley, an associate editor, and two anonymous referees for valuable comments and suggestions. Thanks also to Yasushi Iwamoto, Tsung-Sheng Tsai, and Kuo-chih Yuan for helpful comments and discussions. The remaining errors are the author’s sole responsibility. Financial support from the National Science Council (Grant NSC 98-2410-H-004-043-MY2) and National Chengchi University is gratefully acknowledged.
The Superiority of Environmental Federalism in the Presence of Lobbying and Prior Tax Distortions
Article first published online: 12 MAR 2013
© 2013 Wiley Periodicals, Inc.
Journal of Public Economic Theory
Volume 15, Issue 2, pages 341–361, April 2013
How to Cite
LAI, Y.-B. (2013), The Superiority of Environmental Federalism in the Presence of Lobbying and Prior Tax Distortions. Journal of Public Economic Theory, 15: 341–361. doi: 10.1111/jpet.12021
- Issue published online: 12 MAR 2013
- Article first published online: 12 MAR 2013
- Received May 24, 2010; Accepted May 6, 2011.
It is generally believed that environmental federalism tends to generate greater pollution emissions than centralized policymaking. This paper demonstrates that the opposite can occur in the presence of lobbying. Although the decentralized regime gives rise to a tax-interaction effect, which induces policymakers to set lax environmental policies, it may also reduce the political pressure on enlarging allowed emissions. If the latter outweighs the former, then the decentralized regime will generate less pollution than the centralized regime. Moreover, we also show that the decentralized regime can be more efficient than the centralized regime, which provides an alternative theoretical support for the superiority of environmental federalism.