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Market integration, environmental policy, and transboundry pollution from consumption

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Author Info

  • Kenji Fujiwara

    ()
    (Kwansei Gakuin University)

Abstract

Recent empirics report that transport cost reductions signi cantly contribute to rapidly growing world trade. This paper develops a reciprocal market model of intra-industry trade with transboundary pollution from consumption to consider how market integration in the form of transport cost reductions a ects the noncooperative choice of an environmental policy and the equilibrium welfare. I show that market integration can improve welfare locally, but that welfare under any non-prohibitive trade cost can not be higher than welfare under autarky. This possibility of trade losses exhibits a sharp contrast to the case of production-generated pollution.

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File URL: http://192.218.163.163/RePEc/pdf/kgdp62.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 62.

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Length: 18 pages
Date of creation: Nov 2010
Date of revision: Nov 2010
Handle: RePEc:kgu:wpaper:62

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Keywords: transboundary pollution; consumption-generated pollution; gains from trade; environmental policy;

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