Can Trade Be Good for the Environment?

dc.contributor.author Lapan, Harvey
dc.contributor.author Sikdar, Shiva
dc.contributor.department Economics
dc.date 2018-02-17T22:13:53.000
dc.date.accessioned 2020-06-30T02:04:53Z
dc.date.available 2020-06-30T02:04:53Z
dc.date.issued 2016-01-01
dc.description.abstract <p>We analyze the impact of trade in a differentiated good on environmental policy when there is local and transboundary pollution. In autarky, the (equivalent) pollution tax is set equal to the marginal damage from own emissions. If the strategic policy instrument is a tax, leakage occurs under trade and tends to <em>lower</em> the tax. The net terms of trade effect, due to the exportable and importable varieties of the differentiated good, tends to <em>increase</em> the tax. We derive conditions under which pollution taxes under trade are higher than the marginal damage from own emissions, i.e., <em>higher</em> than the Pigouvian tax and than that under autarky. Then, pollution <em>falls</em>under trade relative to autarky. When countries use quotas/permits to regulate pollution, there is<em>no</em> leakage, while the net terms of trade effect tends to make pollution policy <em>stricter</em>. The equivalent tax is always higher than the marginal damage from own emissions, i.e., <em>always higher</em>than the Pigouvian tax and than that under autarky; hence, pollution <em>always</em> falls under trade. Our analysis provides some insight into the findings in the empirical literature that trade might be good for the environment.</p>
dc.description.comments <p>This is a working paper of an article from <em>Journal of Public Economic Theory </em>(2016), doi: <a href="http://dx.doi.org/10.1111/jpet.12176" target="_blank">10.1111/jpet.12176</a>.</p>
dc.identifier archive/lib.dr.iastate.edu/econ_las_pubs/141/
dc.identifier.articleid 1139
dc.identifier.contextkey 9111155
dc.identifier.s3bucket isulib-bepress-aws-west
dc.identifier.submissionpath econ_las_pubs/141
dc.identifier.uri https://dr.lib.iastate.edu/handle/20.500.12876/21324
dc.source.uri http://lib.dr.iastate.edu/cgi/viewcontent.cgi?article=1012&context=econ_las_workingpapers
dc.subject.disciplines International Economics
dc.subject.disciplines Natural Resource Economics
dc.subject.disciplines Natural Resources Management and Policy
dc.subject.disciplines Other Economics
dc.subject.keywords strategic environmental policy
dc.subject.keywords leakage effect
dc.subject.keywords intra-industry trade
dc.subject.keywords transboundary pollution
dc.title Can Trade Be Good for the Environment?
dc.type article
dc.type.genre article
dspace.entity.type Publication
relation.isOrgUnitOfPublication 4c5aa914-a84a-4951-ab5f-3f60f4b65b3d
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