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Environmental Protection and Trade Liberalization in a Small Open Dual Economy

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  • Ichiroh Daitoh
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    Abstract

    The author investigates the conditions under which environmental protection and trade liberalization might improve urban unemployment and welfare in a small open Harris-Todaro model with polluting urban manufacturing. While a tariff reduction decreases manufacturing employment, a rise in the pollution tax rate may increase it when a dirty input is complementary to capital. Environmental protection and trade liberalization are consistent in reducing the level of urban unemployment because they lower it under the same condition. They are consistent in increasing GDP if a rise in the pollution tax rate decreases manufacturing employment. Otherwise, trade liberalization will mitigate a decrease in GDP because of environmental protection if the degree of urbanization is low and if rural technology exhibits weak diminishing returns to labor. This GDP effect plays a central role in welfare improvement. Copyright � 2008 The Author. Journal compilation � 2008 Blackwell Publishing Ltd.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Review of Development Economics.

    Volume (Year): 12 (2008)
    Issue (Month): 4 (November)
    Pages: 728-736

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    Handle: RePEc:bla:rdevec:v:12:y:2008:i:4:p:728-736

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=1363-6669

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    Cited by:
    1. Li, Xiaochun & Xu, Yuanting & Wang, Dianshuang, 2014. "Environment and labor movement of skilled labor and unskilled labor between sectors," Economic Modelling, Elsevier, vol. 38(C), pages 367-371.

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