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International Trade and Management of Shared Renewable Resource

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  • Yasuhiro Takarada

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  • Takeshi Ogawa
  • Weijia Dong
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    Abstract

    This paper examines the effects of international trade and resource management in a two-country model where each country controls domestic harvest to prevent over-exploitation of an internationally shared renewable resource (e.g., fishery resources). We show that contrary to conventional wisdom, an opening up of trade is likely to raise the steady state utility of a resource-good exporting country, even if it implements weak resource management standards, because the expansion of the resource sector which enjoys economic rent increases its total income. To maximize world welfare in a trading steady state, a resource-good importing country should implement stricter resource management after trade than under autarky but it will implement weak resource management to enjoy economic rent by mitigating the contraction of the resource sector (i.e., rent shifting). Thus, a resource-good exporting country should give some side payments to give a resource-good importing country an incentive to implement strict resource management standards. Keywords: Gains from trade; Shared renewable resource; Resource management JEL Classification: F11; Q27

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    Bibliographic Info

    Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa12p72.

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    Date of creation: Oct 2012
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    Handle: RePEc:wiw:wiwrsa:ersa12p72

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    1. Brian R. Copeland & M. Scott Taylor, 2004. "Trade, Tragedy, and the Commons," NBER Working Papers 10836, National Bureau of Economic Research, Inc.
    2. Chichilnisky, Graciela, 1994. "North-South Trade and the Global Environment," American Economic Review, American Economic Association, vol. 84(4), pages 851-74, September.
    3. Ali Emami & Richard S. Johnston, 2000. "Unilateral Resource Management in a Two-Country General Equilibrium Model of Trade in a Renewable Fishery Resource," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(1), pages 161-172.
    4. Brander, James A. & Scott Taylor, M., 1997. "International trade between consumer and conservationist countries," Resource and Energy Economics, Elsevier, vol. 19(4), pages 267-297, November.
    5. Bulte, E.H. & Damania, R., 2005. "A note on trade liberalization and common pool resources," Open Access publications from Tilburg University urn:nbn:nl:ui:12-165070, Tilburg University.
    6. Hotte, Louis & Long, Ngo Van & Tian, Huilan, 2000. "International trade with endogenous enforcement of property rights," Journal of Development Economics, Elsevier, vol. 62(1), pages 25-54, June.
    7. Brander, James A. & Scott Taylor, M., 1998. "Open access renewable resources: Trade and trade policy in a two-country model," Journal of International Economics, Elsevier, vol. 44(2), pages 181-209, April.
    8. Naoto Jinji, 2007. "International trade and renewable resources under asymmetries of resource abundance and resource management," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 37(4), pages 621-642, August.
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