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    Developing Country Second-Mover Advantage in Competition Over Standards and Taxes

    Groenert, Valeska
    Wooders, Myrna
    Zissimos, Ben
    : http://hdl.handle.net/1803/15866
    : 2009

    Abstract

    We show that, in competition between a developed country and a developing country over environmental standards and taxes, the developing country may have a 'second-mover advantage.' In our model, firms do not unanimously prefer lower environmental-standard levels. We introduce this feature to an otherwise familiar model of fiscal competition. Three distinct outcomes can be characterized by varying the cost to firms of 'standard mismatch': (1) the outcome may be efficient; (2) the developing country may be a 'pollution haven,' where some firms escape excessively high environmental standards in the developed country; (3) environmental standards may be set excessively high.
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