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Environmental regulation and trade openness in the presence of private mitigation

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  • Hotte, Louis
  • Winer, Stanley L.

Abstract

Acknowledging the differential ability of individuals to privately mitigate the consequences of domestic pollution for their health is essential for an understanding of their demands for regulation of the environment and of trade in dirty goods, and for analysis of the implications of these demands for equilibrium policy choices. In a small open economy with exogenous policy, we first explain how private mitigation at a cost results in an unequal distribution of the health consequences of pollution in a manner consistent with epidemiologic studies, and consequently how the benefits and costs of trade in dirty goods interact with choices concerning private mitigation to further polarize the interests of citizens concerning environmental stringency. The economy is then embedded in a broader political economy setting, and simulated to investigate the role of private mitigation in shaping political equilibria. We show that when citizens can choose between mitigating the health consequences of domestic pollution privately and reducing pollution through public policy, the same polarization of interests underlies equilibrium policy choices in both democratic and autocratic regimes.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 97 (2012)
Issue (Month): 1 ()
Pages: 46-57

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Handle: RePEc:eee:deveco:v:97:y:2012:i:1:p:46-57

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Web page: http://www.elsevier.com/locate/devec

Related research

Keywords: Environmental regulation; Pollution; Private mitigation; Defensive measures; Avoidance activities; Health; Trade; Dirty goods; Individual welfare; Democracy; Representation theorem; Autocracy;

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References

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Cited by:
  1. Aklin, Michaël & Bayer, Patrick & Harish, S.P. & Urpelainen, Johannes, 2013. "Understanding environmental policy preferences: New evidence from Brazil," Ecological Economics, Elsevier, vol. 94(C), pages 28-36.
  2. Fredriksson, Per G. & Neumayer, Eric, 2013. "Democracy and climate change policies: Is history important?," Ecological Economics, Elsevier, vol. 95(C), pages 11-19.
  3. Toke Aidt & Uk Hwang, 2014. "To Ban or Not to Ban: Foreign Lobbying and Cross National Externalities," Cambridge Working Papers in Economics 1402, Faculty of Economics, University of Cambridge.

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