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Common ground between free-traders and environmentalists

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  • Karp, Larry
  • Sacheti, Sandeep
  • Zhao, Jinhua

Abstract

We use a North-South model with property right differences and resource dynamics to study the effects of trade on resource use and welfare. Autarky is likely to Pareto-dominate free trade in the long run when the environment is quite fragile, and the result is reversed when the environment is quite resilient. Trade may cause an environmentally poor country to ‘drag down’ its richer trading partner, or cause both countries to degrade their stocks when these would be preserved under autarky. Alternatively, trade may enable the environmentally richer country to ‘pull up’ its partner or cause both countries to preserve their stocks when these would be degraded under autarky. These results rationalize the positions of environmentalists and free-traders. The direction of trade may change over time, but in steady states it is either inefficient or indeterminate. In the former case a switch to autarky would increase global welfare.

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Bibliographic Info

Paper provided by Department of Agricultural & Resource Economics, UC Berkeley in its series Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series with number qt7jw3t8pw.

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Date of creation: 26 Aug 1999
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Handle: RePEc:cdl:agrebk:qt7jw3t8pw

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Keywords: trade; free-trade; environment;

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Cited by:
  1. Michele Ruta & Anthony J. Venables, 2012. "International Trade in Natural Resources: Practice and Policy," Annual Review of Resource Economics, Annual Reviews, vol. 4(1), pages 331-352, 08.
  2. Regibeau Pierre M & Gallegos Alberto, 2004. "Managed Trade, Trade Liberalisation and Local Pollution," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(2), pages 1-26, November.
  3. Anriquez, Gustavo, 2002. "Trade And The Environment: An Economic Literature Survey," Working Papers 28598, University of Maryland, Department of Agricultural and Resource Economics.
  4. Helmut Cremer & Firouz Gahvari, 2006. "Which border taxes? Origin and destination regimes with fiscal competition in output and emission taxes," Working Papers 19458, Institut National de la Recherche Agronomique, France.
  5. Richter, Andries & van Soest, Daan & Grasman, Johan, 2013. "Contagious cooperation, temptation, and ecosystem collapse," Journal of Environmental Economics and Management, Elsevier, vol. 66(1), pages 141-158.
  6. 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.
  7. Gulati, Sumeet, 2001. "The Effects of Choosing Free Trade on Endogenous Environmental Regulation and Welfare: A Model of Common Agency Government," 2001 Annual meeting, August 5-8, Chicago, IL 20449, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  8. Eggert, Håkan & Greaker, Mads, 2009. "Effects of Global Fisheries on Developing Countries: Possibilities for Income and Threat of Depletion," Discussion Papers dp-10-09-02-efd, Resources For the Future.
  9. Akihiho Yanase, 2013. "Free trade may save a renewable resource from exhaustion," Economics Bulletin, AccessEcon, vol. 33(1), pages 226-233.
  10. Karp, Larry, 2003. "Property rights, mobile capital, and comparative advantage," CUDARE Working Paper Series 942, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  11. Zaman, Rubaiya, 2012. "CO2 Emissions, Trade Openness and GDP Percapita : Bangladesh Perspective," MPRA Paper 48515, University Library of Munich, Germany.
  12. Muthukumara Mani & Per G. Fredriksson, 2002. "The Rule of Law and the Pattern of Environment Protection," IMF Working Papers 02/49, International Monetary Fund.

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