International Trade and Conservation with Costly Natural Resource Management
AbstractWe propose a model where the benevolent resource planner's management is endogenous. This allows for the analysis of trade models with management régimes other than the polar open access and 1st best régimes. Interestingly, 2nd best, endogenous, management régimes are more realistic than the textbook 1st best policy prescription. In a very simple model where current gains do not depend on the resource stock, and where resource management incurs a fixed cost, we have disproved, some statements made by the WTO. Indeed, in our 2nd best setting, free trade with "proper" management of resources can lead to welfare losses. It can also cause the extinction of a species and therefore hinder the environment. Further research is underway with more general assumptions. We expect that our results regarding WTO statements and questions will be mitigated, but they should still hold true under some conditions. We know that trade can be welfare increasing and it can help the environment. However, knowing when it does not and why can be helpful for policy-making. This is what we attempt to figure out in this paper.
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