Managed Trade, Trade Liberalisation and Local Pollution
AbstractAbstract The current paper addresses the relationship between trade and endogenous pollution levels, with a focus different from the previous literature. The mechanism linking pollution and trade here is that trade policy provides the home government with a credible threat that helps motivate domestic firms to adopt cleaner technologies. This credible threat comes from the fact that the government has a greater incentive to protect a clean industry than to protect a very polluting one. In that sense, the existence of trade helps reduce domestic pollution compared to what would prevail in a situation of autarky. On the other hand, a commitment to free trade would be counterproductive: it removes the governments ability to credibly threaten lower levels of protection. In fact we show that any trade liberalization hurts the welfare of the home country. In terms of world welfare, moderate trade liberalization is helpful, but only as long as it does not affect the technology choices of the firms. Because committing to lower bounded tariffs limits a governments ability to enforce strict environmental standards, a country that has agreed to tighter tariff limits under the World Trade Organization would, other things equal, be a more likely pollution haven than a country with weaker WTO commitments.
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Bibliographic InfoArticle provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.
Volume (Year): 3 (2004)
Issue (Month): 2 (November)
Contact details of provider:
Web page: http://www.degruyter.com
Other versions of this item:
- Alberto Gallegos & Pierre Regibeau, 2004. "Managed Trade, Trade Liberalisation and Local Pollution," Economics Discussion Papers 580, University of Essex, Department of Economics.
- Gallegos, Alberto & Régibeau, Pierre, 2004. "Managed Trade, Trade Liberalization and Local Pollution," CEPR Discussion Papers 4491, C.E.P.R. Discussion Papers.
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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