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Can cross-border pollution reduce pollution?

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  • Panos Hatzipanayotou
  • Sajal Lahiri
  • Michael S. Michael

Abstract

We develop a two-country model of foreign aid and cross-border pollution resulting from production activities in the recipient country. There is both private and public abatement of pollution, the latter being financed through emissions tax revenue and foreign aid. We characterize a Nash equilibrium in which the donor country chooses the amount of aid and the recipient chooses the fraction of aid allocated to pollution abatement and the emission tax rate. At this equilibrium, an increase in the donor's perceived rate of cross-border pollution reduces emission levels.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 35 (2002)
Issue (Month): 4 (November)
Pages: 805-818

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Handle: RePEc:cje:issued:v:35:y:2002:i:4:p:805-818

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References

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  1. John Beghin & David Roland-Holst & Dominique van der Mensbrugghe, 1994. "Trade and Pollution Linkages: Piecemeal Reform and Optimal Intervention," OECD Development Centre Working Papers 99, OECD Publishing.
  2. Ludema, Rodney D & Wooton, Ian, 1997. "International Trade Rules and Environmental Cooperation under Asymmetric Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 605-25, August.
  3. Jota Ishikawa & Kazuharu Kiyono, 2000. "International Trade and Global Warming," CIRJE F-Series CIRJE-F-78, CIRJE, Faculty of Economics, University of Tokyo.
  4. Merrifield, John D., 1988. "The impact of selected abatement strategies on transnational pollution, the terms of trade, and factor rewards: A general equilibrium approach," Journal of Environmental Economics and Management, Elsevier, vol. 15(3), pages 259-284, September.
  5. Copeland, Brian R & Taylor, M Scott, 1995. "Trade and Transboundary Pollution," American Economic Review, American Economic Association, vol. 85(4), pages 716-37, September.
  6. Copeland Brian R., 1994. "International Trade and the Environment: Policy Reform in a Polluted Small Open Economy," Journal of Environmental Economics and Management, Elsevier, vol. 26(1), pages 44-65, January.
  7. Hatzipanayotou, Panos & Michael, Michael S., 1995. "Foreign aid and public goods," Journal of Development Economics, Elsevier, vol. 47(2), pages 455-467, August.
  8. Ludema, R.D. & Wooton, I., 1992. "Cross-Border Externalities and trade Liberalization: The Strategic Control of Pollution," UWO Department of Economics Working Papers 9202, University of Western Ontario, Department of Economics.
  9. Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 675-740, June.
  10. Khilji, Nasir M. & Zampelli, Ernest M., 1994. "The fungibility of U.S. military and non-military assistance and the impacts on expenditures of major aid recipients," Journal of Development Economics, Elsevier, vol. 43(2), pages 345-362, April.
  11. Abe, Kenzo, 1992. "Tariff Reform in a Small Open Economy with Public Production," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(1), pages 209-22, February.
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Citations

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Cited by:
  1. Hamid Beladi & Sugata Marjit & Lei Yang, . "Outsourcing: Volume and Composition of R&D," Working Papers 0001, College of Business, University of Texas at San Antonio.
  2. Dirk T.G. Ruebbelke & Eytan Sheshinski, 2005. "Transfers as a Means to Combat European Spillovers," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 225(6), pages 699-710, November.
  3. Costas Hadjiyiannis & Panos Hatzipanayotou & Michael S. Michael, 2002. "Optimal Tax Policies with Private-Public Clean-Up, Cross-Border Pollution and Capital Mobility," CESifo Working Paper Series 822, CESifo Group Munich.
  4. Panos Hatzipanayotou & Sajal Lahiri & Michael S. Michael, 2002. "Reforms of Environmental Policies in the Presence of Cross-border Pollution and two Stage Clean Up," University of Cyprus Working Papers in Economics 0203, University of Cyprus Department of Economics.
  5. Luisito Bertinelli & Carmen Camacho & Benteng Zou, 2011. "Carbon capture and storage and transboundary pollution: a differential game approach," CREA Discussion Paper Series 11-17, Center for Research in Economic Analysis, University of Luxembourg.
  6. Hadjiyiannis, Costas & Hatzipanayotou, Panos & Michael, Michael S., 2013. "Competition for environmental aid and aid fungibility," Journal of Environmental Economics and Management, Elsevier, vol. 65(1), pages 1-11.
  7. Panos Hatzipanayotou & Sajal Lahiri & Michael S. Michael, 2005. "Globalization, Cross-Border Pollution and Welfare," CESifo Working Paper Series 1479, CESifo Group Munich.
  8. Schweinberger, A.G. & Woodland, A.D., 2008. "The short and long run effects of tied foreign aid on pollution abatement, pollution and employment: A pilot model," Journal of Environmental Economics and Management, Elsevier, vol. 55(3), pages 310-325, May.
  9. Beladi, Hamid & Chao, Chi-Chur & Hazari, Bharat R. & Laffargue, Jean-Pierre, 2009. "Tourism and the environment," Resource and Energy Economics, Elsevier, vol. 31(1), pages 39-49, January.
  10. Panos Hatzipanayotou & Sajal Lahiri & Michael Michael, 2008. "Cross-Border Pollution, Terms of Trade, and Welfare," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 41(3), pages 327-345, November.
  11. B. Mak ARVIN & Zafar KAYANI & Marisa A. SCIGLIANO, 2009. "Environmental Aid and Economic Development in the Third World," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 9(1).
  12. Alain-Désiré Nimubona & Horatiu Rus, 2011. "Green Technology Transfers and Border Tax Adjustments," Working Papers 1102, University of Waterloo, Department of Economics, revised May 2011.
  13. Takumi Haibara, 2009. "Environmental Funds, Public Abatement, and Welfare," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 44(2), pages 167-177, October.
  14. repec:ebl:ecbull:v:6:y:2007:i:5:p:1-8 is not listed on IDEAS
  15. Li, Jun, 2013. "Foreign aid, urbanization and green cities," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).

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