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Trade, Transboundary, Pollution, and Foreign Lobbying

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  • Victoria I Mumanskaya
  • Charles F Mason
  • Edward B Barbier

Abstract

In this paper, we explore the use of trade policy in addressing transboundary stock pollution problems such as acid rain and water pollution. We show that a tariff determined by the current level of accumulated pollution can induce the time path of emissions optimal for the downstream (polluted) country. But if the upstream (polluting) country can lobby the downstream government to impose lower tariffs, distortions brought by corruption and foreign lobbying lead to a rise in the upstream country’s social welfare, and to a decrease in social welfare in the downstream country. Thus, the usefulness of trade policy as a tool for encouraging cooperation and internalizing transboundary externalities depends critically on the degree of governments’ susceptibility to foreign political influence.

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Paper provided by Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford in its series OxCarre Working Papers with number 071.

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Date of creation: 2012
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Handle: RePEc:oxf:oxcrwp:071

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Keywords: Trade; Transboundary; Pollution; Foreign Lobbying;

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  1. Nagase, Yoko & Silva, Emilson C.D., 2007. "Acid rain in China and Japan: A game-theoretic analysis," Regional Science and Urban Economics, Elsevier, vol. 37(1), pages 100-120, January.
  2. Günther Schulze, 1999. "International Trade in Art," Journal of Cultural Economics, Springer, vol. 23(1), pages 109-136, March.
  3. Basak Bayramoglu, 2006. "Transboundary Pollution in the Black Sea: Comparison of Institutional Arrangements," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 35(4), pages 289-325, December.
  4. Damania, Richard & Fredriksson, Per G. & List, John A., 2003. "Trade liberalization, corruption, and environmental policy formation: theory and evidence," Journal of Environmental Economics and Management, Elsevier, vol. 46(3), pages 490-512, November.
  5. Nagase, Yoko & Silva, Emilson C. D., 2000. "Optimal Control of Acid Rain in a Federation with Decentralized Leadership and Information," Journal of Environmental Economics and Management, Elsevier, vol. 40(2), pages 164-180, September.
  6. Kee, Hiau Looi & Olarreaga, Marcelo & Silva, Peri, 2003. "Market Access for Sale: Latin America's Lobbying for US Tariff Preferences," CEPR Discussion Papers 4077, C.E.P.R. Discussion Papers.
  7. Dockner Engelbert J. & Van Long Ngo, 1993. "International Pollution Control: Cooperative versus Noncooperative Strategies," Journal of Environmental Economics and Management, Elsevier, vol. 25(1), pages 13-29, July.
  8. Kee, Hiau Looi & Olarreaga, Marcelo & Silva, Peri, 2007. "Market access for sale," Journal of Development Economics, Elsevier, vol. 82(1), pages 79-94, January.
  9. Damania, Richard & Fredriksson, Per G., 2003. "Trade policy reform, endogenous lobby group formation, and environmental policy," Journal of Economic Behavior & Organization, Elsevier, vol. 52(1), pages 47-69, September.
  10. Y. Hossein Farzin & Jinhua Zhao, 2003. "Pollution Abatement Investment When Firms Lobby Against Environmental Regulation," Working Papers 2003.82, Fondazione Eni Enrico Mattei.
  11. List, John A. & Mason, Charles F., 2001. "Optimal Institutional Arrangements for Transboundary Pollutants in a Second-Best World: Evidence from a Differential Game with Asymmetric Players," Journal of Environmental Economics and Management, Elsevier, vol. 42(3), pages 277-296, November.
  12. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249.
  13. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521311120.
  14. Fernandez, Linda, 2002. "Trade's Dynamic Solutions to Transboundary Pollution," Journal of Environmental Economics and Management, Elsevier, vol. 43(3), pages 386-411, May.
  15. Barbier, Edward B. & Damania, Richard & Leonard, Daniel, 2005. "Corruption, trade and resource conversion," Journal of Environmental Economics and Management, Elsevier, vol. 50(2), pages 276-299, September.
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