Baton à court terme, carotte à long terme : le rôle des conditions initiales
Résumé
This paper explores the dynamic properties of price-based policies in a model of competition between two jurisdictions. Jurisdictions invest over time in infrastructures to increase the quality of environment, a global public good. They are identical in all respects but the initial stocks of infrastructures. This is a dynamic type of heterogeneity that disappears in the long run. Therefore, at the steady state, usual intuitions from static settings apply: identical jurisdictions inefficiently under-invest, calling for public subsidies. In the short run, however, counterintuitive properties are established: i) the evolution of the subsidy can be non-monotonic, ii) one jurisdiction can be temporarily taxed whereas the other is subsidised. It is shown how these phenomena are related to initial conditions.