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The Superiority of Environmental Federalism in the Presence of Lobbying and Prior Tax Distortions
Author(s) -
LAI YUBONG
Publication year - 2013
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12021
Subject(s) - federalism , economics , environmental tax , politics , environmental policy , fiscal federalism , public economics , natural resource economics , decentralization , tax reform , political science , market economy , law
Abstract 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.