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Environmental Protection and Trade Liberalization in a Small Open Dual Economy

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  • Ichiroh Daitoh

Abstract

The author investigates the conditions under which environmental protection and trade liberalization might improve urban unemployment and welfare in a small open Harris-Todaro model with polluting urban manufacturing. While a tariff reduction decreases manufacturing employment, a rise in the pollution tax rate may increase it when a dirty input is complementary to capital. Environmental protection and trade liberalization are consistent in reducing the level of urban unemployment because they lower it under the same condition. They are consistent in increasing GDP if a rise in the pollution tax rate decreases manufacturing employment. Otherwise, trade liberalization will mitigate a decrease in GDP because of environmental protection if the degree of urbanization is low and if rural technology exhibits weak diminishing returns to labor. This GDP effect plays a central role in welfare improvement. Copyright © 2008 The Author. Journal compilation © 2008 Blackwell Publishing Ltd.

Suggested Citation

  • Ichiroh Daitoh, 2008. "Environmental Protection and Trade Liberalization in a Small Open Dual Economy," Review of Development Economics, Wiley Blackwell, vol. 12(4), pages 728-736, November.
  • Handle: RePEc:bla:rdevec:v:12:y:2008:i:4:p:728-736
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    References listed on IDEAS

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    1. Beghin, John C. & Roland-Holst, David & Van der Mensbrugghe, Dominique, 2002. "Trade and the Environment in General Equilibrium: Evidence from Developing Economies," Staff General Research Papers Archive 4090, Iowa State University, Department of Economics.
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    Cited by:

    1. Li, Xiaochun & Xu, Yuanting & Wang, Dianshuang, 2014. "Environment and labor movement of skilled labor and unskilled labor between sectors," Economic Modelling, Elsevier, vol. 38(C), pages 367-371.
    2. repec:wsi:serxxx:v:62:y:2017:i:02:n:s0217590815500642 is not listed on IDEAS
    3. Ichiroh Daitoh & Nori Tarui, 2016. "Open-access Renewable Resources and Urban Unemployment: Dual Institutional Failures in a Small Open Economy," Keio-IES Discussion Paper Series 2016-009, Institute for Economics Studies, Keio University.
    4. Makoto Tawada & Shuqin Sun, 2010. "Urban Pollution, Unemployment and National Welfare in a Dualistic Economy," Review of Development Economics, Wiley Blackwell, vol. 14(2), pages 311-322, May.

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