The Long-Run Effects of Environmental Reform in Open Economies
AbstractWe compare the short-run and long-run effects of environmental reform and harmonization under autarky and free trade. When trade is driven by environmental distortions rather than real relative advantages, harmonization of environmental policies, even if achieved by lowering standards in one country, can improve short-run aggregate welfare. With the possibility of multiple steady states, long-run considerations favor a \race to the top" rather than a \race to the bottom" even when upward and downward harmonizations are equivalent in the short run. For a country trapped in a low (or bad) steady state, environmental reform may not move it to a high (or good) steady state under autarky. However, under trade, harmonization of policies may enable this country to reach the high steady state. Conversely, reforms that increase the relative differences in distortions may, under trade, cause economies to move toalow steady state.
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Bibliographic InfoPaper provided by Department of Agricultural & Resource Economics, UC Berkeley in its series Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series with number qt0bm6h9ct.
Date of creation: 27 Nov 2000
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International trade and the environment; environmental policy reform; international;
Other versions of this item:
- Karp, Larry & Zhao, Jinhua & Sacheti, Sandeep, 2003. "The long-run effects of environmental reform in open economies," Journal of Environmental Economics and Management, Elsevier, vol. 45(2), pages 246-264, March.
- Karp, Larry S. & Zhao, Jinhua & Sacheti, Sandeep, 2000. "The long-run effects of environmental reform in open economies," CUDARE Working Paper Series 818, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Zhao, Jinhua & Karp, Larry & Sacheti, Sandeep, 2001. "Common Ground Between Free-Traders and Environmentalists," Staff General Research Papers 5138, Iowa State University, Department of Economics.
- Karp, Larry & Sacheti, Sandeep & Zhao, Jinhua, 1999. "Common ground between free-traders and environmentalists," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt7jw3t8pw, Department of Agricultural & Resource Economics, UC Berkeley.
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- Karp, Larry, 2003. "Property rights, mobile capital, and comparative advantage," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt4jt9j6dn, Department of Agricultural & Resource Economics, UC Berkeley.
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