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Trade in Secondhand Goods, Monitoring of Illegal Trade, and Import Quotas on Legal Trade

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  • Keisaku Higashida

    ()
    (School of Economics, Kwansei Gakuin University)

Abstract

This paper examines the monitoring of illegal trade, and restrictions on the legal trade, of secondhand goods. We assume that the home (foreign) country exports (imports) secondhand goods both legally and illegally. We demonstrate that when the trade restriction is nonbinding, and part of the legally imported goods serve not as secondhand but as materials, an increase in the probability of monitoring may increase expected foreign environmental damage. In contrast, when the trade restriction is binding, if part of the legal imports is resold for material use, a stricter trade restriction decreases expected foreign environmental damage. We also demonstrate that when governments noncooperatively select monitoring probabilities, the probability of foreign monitoring is necessarily higher than in the second-best situation. In this case, a commitment by the home government to its monitoring probability improves welfare in both countries, and this commitment arises in the extended game in which both governments choose the timing of the move in the first stage and the monitoring probabilities in the second stage. Moreover, when the foreign government chooses the level of the import quota on legal imports, it is possible that the foreign trade restriction is stricter than the second-best level. In such a case, any commitment by either government cannot simultaneously improve the welfare of both countries.

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File URL: http://192.218.163.163/RePEc/pdf/kgdp90.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 90.

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Length: 29 pages
Date of creation: Jun 2012
Date of revision: Jun 2012
Handle: RePEc:kgu:wpaper:90

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Keywords: hazardous wastes; monitoring; secondhand goods; trade restriction;

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  1. van Beukering, Pieter J. H. & Bouman, Mathijs N., 2001. "Empirical Evidence on Recycling and Trade of Paper and Lead in Developed and Developing Countries," World Development, Elsevier, vol. 29(10), pages 1717-1737, October.
  2. Ines Macho-Stadler & David Pérez-Castrillo, 2004. "Optimal Enforcement Policy and Firms’ Emissions and Compliance with Environmental Taxes," CESifo Working Paper Series 1193, CESifo Group Munich.
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  4. Hamilton, J.H. & Slutsky, S.M., 1988. "Endogenous Timing In Duopoly Games: Stackelberg Or Cournot Equilibria," Papers 88-4, Florida - College of Business Administration.
  5. Christer Berglund & Patrik Söderholm, 2003. "An Econometric Analysis of Global Waste Paper Recovery and Utilization," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 26(3), pages 429-456, November.
  6. Thomas Kinnaman & Hide-Fumi Yokoo, 2011. "The Environmental Consequences of Global Reuse," American Economic Review, American Economic Association, vol. 101(3), pages 71-76, May.
  7. James Cassing & Thomas Kuhn, 2003. "Strategic Environmental Policies when Waste Products are Tradable," Review of International Economics, Wiley Blackwell, vol. 11(3), pages 495-511, 08.
  8. Harford, Jon D., 1987. "Self-reporting of pollution and the firm's behavior under imperfectly enforceable regulations," Journal of Environmental Economics and Management, Elsevier, vol. 14(3), pages 293-303, September.
  9. Berglund, Christer & Soderholm, Patrik, 2003. "Complementing Empirical Evidence on Global Recycling and Trade of Waste Paper," World Development, Elsevier, vol. 31(4), pages 743-754, April.
  10. Copeland, Brian R., 1991. "International trade in waste products in the presence of illegal disposal," Journal of Environmental Economics and Management, Elsevier, vol. 20(2), pages 143-162, March.
  11. Derek Kellenberg, 2010. "Consumer waste, backhauling, and pollution havens," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 283-304, November.
  12. Clerides, Sofronis & Hadjiyiannis, Costas, 2008. "Quality standards for used durables: An indirect subsidy?," Journal of International Economics, Elsevier, vol. 75(2), pages 268-282, July.
  13. Jen Baggs, 2009. "International Trade in Hazardous Waste," Review of International Economics, Wiley Blackwell, vol. 17(1), pages 1-16, 02.
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