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Common Ground Between Free-traders and Environmentalists

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Author Info
Karp, Larry
Sacheti, Sandeep

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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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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1598.

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Date of creation: May 1997
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Handle: RePEc:cpr:ceprdp:1598

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Related research
Keywords: Development Policy; Environmental Management; General Equilibrium; International Trade;

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Find related papers by JEL classification:
D5 - Microeconomics - - General Equilibrium and Disequilibrium
F1 - International Economics - - Trade
O20 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - General
Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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  1. Chichilnisky, Graciela, 1993. "North-South trade and the dynamics of renewable resources," Structural Change and Economic Dynamics, Elsevier, vol. 4(2), pages 219-248, December. [Downloadable!] (restricted)
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  2. Low, P., 1992. "International Trade and the Environment," World Bank - Discussion Papers 159, World Bank.
  3. James A. Brander & M. Scott Taylor, 1997. "International Trade and Open-Access Renewable Resources: The Small Open Economy Case," Canadian Journal of Economics, Canadian Economics Association, vol. 30(3), pages 526-52, August. [Downloadable!] (restricted)
    Other versions:
  4. Anderson, Kym, 1993. "Economic Growth, Environmental Issues and Trade," CEPR Discussion Papers 830, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  5. Newbery, David M G & Stiglitz, Joseph E, 1984. "Pareto Inferior Trade," Review of Economic Studies, Blackwell Publishing, vol. 51(1), pages 1-12, January. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. 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). [Downloadable!]
  2. Per G. Fredriksson & Muthukumara Mani, 2002. "The Rule of Law and the Pattern of Environment Protection," IMF Working Papers 02/49, International Monetary Fund. [Downloadable!]
  3. Larry Karp & Jinhua Zhao & Sandeep Sacheti, 2000. "The Long-Run Effects of Environmental Reform in Open Economies," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series 818, Department of Agricultural & Resource Economics, UC Berkeley. [Downloadable!]
    Other versions:
  4. Larry Karp, 2003. "Property rights, mobile capital, and comparative advantage," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series 942, Department of Agricultural & Resource Economics, UC Berkeley. [Downloadable!]
    Other versions:
  5. Anriquez, Gustavo, 2002. "Trade And The Environment: An Economic Literature Survey," Working Papers 28598, University of Maryland, Department of Agricultural and Resource Economics. [Downloadable!]
  6. Karp, Larry & Zhao, Jinhua & Sacheti, Sandeep, 1999. "The Uncertain Benefits of Environmental Reform in Open Economies," Staff General Research Papers 4043, Iowa State University, Department of Economics. [Downloadable!]
    Other versions:
  7. Alberto Gallegos & Pierre Regibeau, 2004. "Managed Trade, Trade Liberalisation and Local Pollution," Economics Discussion Papers 580, University of Essex, Department of Economics. [Downloadable!]
    Other versions:
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