Elgar original reference
Edited by Jeroen C.J.M. van den Bergh
Chapter 39: Location Choice, Environmental Quality and Public Policy(K.J. Button and P. Rietveld)
39 Location choice, environmental quality and public policy James R. Markusen 1. Introduction Much of the literature in environmental economics and indeed in public finance and international trade abstracts from the location decisions of individual firms. Yet the possibility that individual plants may relocate in response to environmental costs has clearly been a concern of public policy. Often these concerns are expressed at a relatively local level, where a single plant can be a major employer. But in the last few years, these concerns have been expressed at a national level in the US and Europe. The possibility of US plants relocating Mexico was an issue in the NAFTA debate, and possible relocations by European firms to Eastern Europe concern the EU. The purpose of this chapter is to consider the location decisions of footloose firms in response to environmental costs imposed by regulatory standards or taxes. To accomplish this purpose we require a conceptual and modelling approach that includes several elements. First, in so far as the model requires that individual firms can be identified and plant location decisions are meaningful, production technology must be characterized by increasing returns to scale. In traditional neoclassical general equilibrium trade theory with constant returns to scale, only ‘industries’ can be identified and a firm’s plant location decision is not a meaningful concept. Increasing returns to scale in turn implies that market structure will be characterized by imperfect competition. Second, in so far as the policy debate frequently mentions multinationals, we must include...
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.