Partial cross-ownership and strategic environmental policy
Bárcena Ruiz, Juan Carlos
Campo Corredera, María Luz
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This paper analyzes the effect that passive investment in rival firms has on the setting of cooperative and non-cooperative environmental taxes. We consider two firms located in different countries, one of which owns a stake in its rival. We show that partial cross-ownership affects the taxes set by the countries in the cooperative and non-cooperative cases. Depending on the stake that one firm has in its rival we show that cooperative taxes may he higher or lower than non-cooperative taxes. Moreover, for intermediate values of the stake, the non-cooperative tax is higher in one country and lower in the other than the cooperative tax.