Premium
Plant Location, Wind Direction and Pollution Policy Under Offshoring
Author(s) -
Zhao Laixun,
Haruyama Tetsugen
Publication year - 2015
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12257
Subject(s) - incentive , oligopoly , economics , government (linguistics) , pollution , environmental policy , control (management) , economic surplus , offshoring , microeconomics , public economics , natural resource economics , business , market economy , cournot competition , welfare , marketing , ecology , linguistics , outsourcing , biology , management , philosophy
We examine pollution policy in a unified three‐country framework, with the country in the middle playing double roles as both a polluter and a victim. We find that government preference over profits and consumer surplus to be important and so is environmentalism. In particular, the most downwind country has the least incentives to control pollution. Under oligopoly, several additional undesirable scenarios may arise, due to the interaction between wind direction and the incentive trade‐offs in rent‐shifting and pollution control. We analyse the mechanisms behind and provide policy guidance.