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Trade liberalization and the environment: The case of intra-industry trade

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  • K. C. Fung
  • Andrea Maechler

Abstract

While a large body of literature examines the environmental impact of trade on the environment, this discussion focuses largely on the context of inter-industry trade. Empirical evidence has long suggested that an increasing share of international trade takes the form of intra- rather than inter-industry trade. In an attempt to fill this gap, the present paper uses a price-setting duopoly model of intra-industry trade to highlight the environmental consequences of trade liberalization when oligopolistic rivalry rather than comparative advantage drives international trade. We find that the environmental impact of trade liberalization depends mostly on two factors, namely, on the nature of pollution (i.e. whether it is local, transboundary or global) and on which country liberalizes trade (i.e. whether it is the 'clean' country or the 'dirty' country).

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal The Journal of International Trade & Economic Development.

Volume (Year): 16 (2007)
Issue (Month): 1 ()
Pages: 53-69

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Handle: RePEc:taf:jitecd:v:16:y:2007:i:1:p:53-69

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Related research

Keywords: Trade; environment; intra-industry trade;

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Cited by:
  1. Leonard Wang & Ya-Chin Wang & Lihong Zhao, 2009. "Trade liberalization, intra-industry trade and the environment: competition mode and the order of firms’ moves," International Review of Economics, Springer, vol. 56(2), pages 133-144, June.

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