Recent political discussions about the possible advantages of first-mover behaviour in terms of environmental policy again called attention to the well-established controversy about the effects of environmental regulation on international competitiveness. Conventional theory claims that the...

Policy diffusion refers to the process by which a political innovation like the introduction of a novel emission tax disseminates over time among countries. In order to analyze this issue from an economic point of view we develop a simple two-country-model of the taxation of emissions in...