Environmental and Trade Policies: Some Methodological Lessons
AbstractThis paper describes the results of using a new computable general equilibrium model for the European Union that incorporates local and transboundary externalities to evaluate the effects of trade policy reform. In contrast to all past theoretical and empirical research, this model includes the morbidity effects of three criteria air pollutants as nonseparable arguments of household preferences. The model is based on the Harrison-Rutherford Wooton model that identifies 11 regions, six aggregate commodities and three factor inputs. Three modifications were made to the model: (a) Stone Geary utility functions were used to characterize preferences for each consumer; (b) nine morbidity effects due to the three air pollutants were introduced as translating effects; and (c) pollution generation and dispersion models were introduced and calibrated to the model's base solution. General equilibrium welfare effects are evaluated with a balance of trade function. Overall, the evaluations of policy suggest that incorporating environmental effects as non-separable influences on preferences can have a marked impact on the evaluation of trade policy reforms.
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Bibliographic InfoPaper provided by Resources For the Future in its series Discussion Papers with number dp-96-18.
Date of creation: 01 Jun 1996
Date of revision:
Other versions of this item:
- Smith, V. Kerry & Espinosa, J. Andrès, 1996. "Environmental and trade policies: some methodological lessons," Environment and Development Economics, Cambridge University Press, vol. 1(01), pages 19-40, February.
- Smith, Kerry & J. Andres Espinosa, 1995. "Environmental and Trade Policies: Some MethodologicalLessons," Working Papers 95-47, Duke University, Department of Economics.
- Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-24 (All new papers)
- NEP-ENE-2006-01-24 (Energy Economics)
- NEP-ENV-2006-01-24 (Environmental Economics)
- NEP-INT-2006-01-24 (International Trade)
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