Environmental taxes, offshoring and welfare: The effects of environmental damage and pollution intensity

Iida, Takeshi; Mukherjee, Arijit

Abstract

We analyze the effects of domestic environmental damage and pollution intensity on a monopolist final good producer's incentive for offshoring a critical intermediate good. Contrary to the usual pollution haven hypothesis, we find that a higher domestic environmental damage, which creates a higher domestic environmental tax, may decrease the incentive for offshoring. This trend is enhanced by a higher pollution intensity of the final good production. Hence, a lower pollution intensity of the final good production may increase offshoring and pollution leakage. Offshoring in our analysis can be excessive or insufficient from the point of view of the domestic country. JEL classification numbers: F23; L13; Q56; Q58

Citation

Iida, T., & Mukherjee, A. (2025). Environmental taxes, offshoring and welfare: The effects of environmental damage and pollution intensity. Journal of Environmental Economics and Management, 130, Article 103075. https://doi.org/10.1016/j.jeem.2024.103075

• Journal Article Type: Article
• Acceptance Date: Nov 12, 2024
• Online Publication Date: Nov 22, 2024
• Publication Date: 2025-03
• Deposit Date: Nov 14, 2024
• Publicly Available Date: May 23, 2026
• Journal: Journal of Environmental Economics and Management
• Print ISSN: 0095-0696
• Electronic ISSN: 1096-0449
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 130
• Article Number: 103075
• DOI: https://doi.org/10.1016/j.jeem.2024.103075
• Keywords: Environmental Policy; Offshoring; Pollution haven; Pollution intensity
• Public URL: https://nottingham-repository.worktribe.com/output/41912138
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S0095069624001499?via%3Dihub
• Additional Information: This article is maintained by: Elsevier; Article Title: Environmental taxes, offshoring and welfare: The effects of environmental damage and pollution intensity; Journal Title: Journal of Environmental Economics and Management; CrossRef DOI link to publisher maintained version: https://doi.org/10.1016/j.jeem.2024.103075; Content Type: article; Copyright: © 2024 The Authors. Published by Elsevier Inc.