Trade Structure, Transboundary Pollution and Multilateral Trade Liberalization: the Effects on Environmental Taxes and Welfare
AbstractThis paper considers a trade situation where the production activities of potentially heterogeneous countries generate pollution which can cross borders and harm the well-being of all the countries involved. In each of those countries the policy market levies pollution taxes on the polluting firms and a tariff on imports in order to correct that distortion. The purpose of the paper is to investigate the effect of a reduction in the tariff on equilibrium pollution taxes and welfare. The existing literature has investigated this problem for trade between two identical countries. This paper analyzes the problem in the more realistic context where countries are not necessarily identical and trade can be multilateral. It becomes possible to show what bias is introduced when those two realities are neglected. I find that a tariff reduction can actually lower output; it can also lower welfare even if pollution is purely local.
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Bibliographic InfoPaper provided by CREATE in its series Cahiers de recherche CREATE with number 2012-8.
Date of creation: 2012
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Trade liberalization; Pollution taxes; Transboundary pollution; Heterogeneous countries; Imperfect markets;
Other versions of this item:
- Bruno Nkuiya, 2013. "Trade Structure, Transboundary Pollution and Multilateral Trade Liberalization: The Effects on Environmental Taxes and Welfare," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 55(3), pages 337-355, July.
- Nkuiya, Bruno, 2012. "Trade Structure, Transboundary Pollution and Multilateral Trade Liberalization: the Effects on Environmental Taxes and Welfare," Working Papers 135987, University of Laval, Center for Research on the Economics of the Environment, Agri-food, Transports and Energy (CREATE).
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- F18 - International Economics - - Trade - - - Trade and Environment
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-20 (All new papers)
- NEP-ENE-2012-10-20 (Energy Economics)
- NEP-ENV-2012-10-20 (Environmental Economics)
- NEP-INT-2012-10-20 (International Trade)
- NEP-REG-2012-10-20 (Regulation)
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