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Christian-Albrechts-Universität zu Kiel

Institut für Volkswirtschaftslehre - Department of Economics
Economics Working Papers

Economics Working Papers: Abstract 2007-13


Nummer

2007-13

Autoren

Barbara Stoschek

 

Titel

 

The Political Economy of Environmental Regulations and Industry Compensation
Abstract This paper uses a political-economy framework to analyze what consequences the exogenous introduction of a quantitative restriction on total emissions in a small open economy has on the stringency of domestic trade policy. The question is whether and to what extent the government, if it takes different lobby groups´ interests into consideration, has an incentive to compensate the polluting industry for stricter environmental regulations by granting higher protection to it. It turns out that the government will indeed tend to increase subsidization of the industry affected by environmental regulation. This compensation will even be more than complete as long as environmental interests are taken into account. Hence, contrary to what might be expected, a net benefit for the polluting sector arises from environmental restrictions.

Keywords: Environmental Regulations, International Competitiveness, Political Economy, Trade Policy

JEL classification: F18, Q52, Q58

 

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