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Trade agreements, domestic environmental regulation, and transboundary pollution

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  • Lai, Yu-Bong
  • Hu, Chia-Hsien

Abstract

This paper investigates a second-best trade agreement between two countries that takes the distortion arising from their non-coordinated environmental policies into consideration. In a reciprocal-markets model with bidirectional transboundary pollution, we find that if the transboundary pollution is sufficiently strong, the second-best trade agreement requires that both countries subsidize the imported goods whose consumption gives rise to pollution. We also find that a bilateral tariff reduction is beneficial to the global environment.

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File URL: http://www.sciencedirect.com/science/article/B6VFJ-4P1P6SK-1/1/441a690500eba6ee54dc04b03c8b1be4
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Bibliographic Info

Article provided by Elsevier in its journal Resource and Energy Economics.

Volume (Year): 30 (2008)
Issue (Month): 2 (May)
Pages: 209-228

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Handle: RePEc:eee:resene:v:30:y:2008:i:2:p:209-228

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Web page: http://www.elsevier.com/locate/inca/505569

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References

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  1. Jayadevappa, Ravishankar & Chhatre, Sumedha, 2000. "International trade and environmental quality: a survey," Ecological Economics, Elsevier, vol. 32(2), pages 175-194, February.
  2. Hungerford, Thomas L., 1991. "GATT: A cooperative equilibrium in a noncooperative trading regime?," Journal of International Economics, Elsevier, vol. 31(3-4), pages 357-369, November.
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  19. John S. Wilson & Catherine L. Mann & Tsunehiro Otsuki, 2003. "Trade Facilitation and Economic Development: A New Approach to Quantifying the Impact," World Bank Economic Review, World Bank Group, vol. 17(3), pages 367-389, December.
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  21. Abrego, Lisandro, et al, 2001. "Trade and Environment: Bargaining Outcomes from Linked Negotiations," Review of International Economics, Wiley Blackwell, vol. 9(3), pages 414-28, August.
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Cited by:
  1. Michel Cavagnac & Isabelle Péchoux, 2010. "Domestic Effects of Environmental Policies with Transboundary Pollution," Recherches économiques de Louvain, De Boeck Université, vol. 76(1), pages 113-134.
  2. Takeshi Iida & Kenji Takeuchi, 2011. "Does free trade promote environmental technology transfer?," Journal of Economics, Springer, vol. 104(2), pages 159-190, October.
  3. Takeshi Iida & Kenji Takeuchi, 2010. "Policy-Induced Environmental Technology Transfer," Discussion Papers 1008, Graduate School of Economics, Kobe University.

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