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Optimal Pollution Standard in an Open Economy: Characterizing Environmental Diversity

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  • Satya P. Das

Abstract

The paper examines the optimal pollution standard for a large open economy. Using a two‐country partial‐equilibrium framework, the optimal standards are charaterized for autarky, free trade, and free trade together with cooperation among countries in setting standards. If pollution is local, at the free‐trade equilibrium, the exporting country imposes a stricter standard than does the importing country. The ranking may be reversed if pollution is transnational. A surpriising implication is that if pollution is local, cooperation may imply a less stringent standard for both the exporting country and the importing country.

Suggested Citation

  • Satya P. Das, 2001. "Optimal Pollution Standard in an Open Economy: Characterizing Environmental Diversity," Review of International Economics, Wiley Blackwell, vol. 9(3), pages 429-442, August.
    • Handle: RePEc:bla:reviec:v:9:y:2001:i:3:p:429-442
    DOI: 10.1111/1467-9396.00290
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    Cited by:

    1. Meeta Mehra & Satya Das, 2008. "North–South Trade and Pollution Migration: The Debate Revisited," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 40(1), pages 139-164, May.

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