Regional versus Multilateral Trade Liberalization, Environmental Taxation and Welfare
AbstractWe consider strategic trade among identical countries and compare the impacts of multilateral versus regional tariff reduction on equilibrium pollution tax and social welfare. While both forms of trade liberalization increase production and consumption in the tariff-reducing countries, regional trade liberalization also reduces production in a non-participating country and may decrease its consumption. When pollution is local, regional and multilateral trade liberalization have similar impacts in the tariff-reducing countries. In contrast, when pollution is perfectly transboundary, regional (multilateral) trade liberalization (i) weakens (may strengthen) environmental protection in the tariff-reducing countries, and (ii) in the neighbourhood of free trade, may increase (decreases) welfare of the tariff-reducing countries.
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Bibliographic InfoPaper provided by The University of Winnipeg, Department of Economics in its series Departmental Working Papers with number 2011-03.
Length: 23 pages
Date of creation: Jul 2011
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Find related papers by JEL classification:
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
- F18 - International Economics - - Trade - - - Trade and Environment
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
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