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Environmental Protection With Policies For Sale

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  • Schleich, Joachim

Abstract

This paper generalizes the Grossman-Helpman political economy model to characterize the structure of environmental and industry protection for a small open economy when domestic and/or trade policies are the outcome of a noncooperative common agency game between sector-specific producer lobbies and the government. For a consumption externality, the political equilibrium results if domestic and trade policies are available, are production-enhancing protection of organized industries, but the same environmental protection as Pigouvian taxes. Subsidies to organized industries counterbalance environmental taxes when there is a production externality, and it is ambiguous whether domestic or trade policy alone leads to more environmental protection. In addition, this paper demonstrates that the original Grossman-Helpman results arise as a special case that rests on the assumption that only trade policies are available to the government.

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File URL: http://purl.umn.edu/51207
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Bibliographic Info

Paper provided by International Agricultural Trade Research Consortium in its series Working Papers with number 51207.

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Date of creation: 1997
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Handle: RePEc:ags:iatrwp:51207

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Keywords: Environmental Economics and Policy;

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Cited by:
  1. Aidt, Toke S., 1998. "Political internalization of economic externalities and environmental policy," Journal of Public Economics, Elsevier, vol. 69(1), pages 1-16, July.

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