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Environmental regulation and trade openness in the presence of private mitigation


  • Hotte, Louis
  • Winer, Stanley L.


Acknowledging the differential ability of individuals to privately mitigate the consequences of domestic pollution for their health is essential for an understanding of their demands for regulation of the environment and of trade in dirty goods, and for analysis of the implications of these demands for equilibrium policy choices. In a small open economy with exogenous policy, we first explain how private mitigation at a cost results in an unequal distribution of the health consequences of pollution in a manner consistent with epidemiologic studies, and consequently how the benefits and costs of trade in dirty goods interact with choices concerning private mitigation to further polarize the interests of citizens concerning environmental stringency. The economy is then embedded in a broader political economy setting, and simulated to investigate the role of private mitigation in shaping political equilibria. We show that when citizens can choose between mitigating the health consequences of domestic pollution privately and reducing pollution through public policy, the same polarization of interests underlies equilibrium policy choices in both democratic and autocratic regimes.

Suggested Citation

  • Hotte, Louis & Winer, Stanley L., 2012. "Environmental regulation and trade openness in the presence of private mitigation," Journal of Development Economics, Elsevier, vol. 97(1), pages 46-57.
  • Handle: RePEc:eee:deveco:v:97:y:2012:i:1:p:46-57 DOI: 10.1016/j.jdeveco.2011.01.004

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    Cited by:

    1. repec:bla:ecinqu:v:55:y:2017:i:3:p:1511-1537 is not listed on IDEAS
    2. Bernard, Sophie & Hotte, Louis & Winer, Stanley L., 2014. "Democracy, inequality and the environment when citizens can mitigate health consequences of pollution privately or act collectively," European Journal of Political Economy, Elsevier, vol. 34(C), pages 142-156.
    3. Fredriksson, Per G. & Neumayer, Eric, 2013. "Democracy and climate change policies: Is history important?," Ecological Economics, Elsevier, vol. 95(C), pages 11-19.
    4. Aklin, Michaël & Bayer, Patrick & Harish, S.P. & Urpelainen, Johannes, 2013. "Understanding environmental policy preferences: New evidence from Brazil," Ecological Economics, Elsevier, vol. 94(C), pages 28-36.
    5. Toke Aidt & Uk Hwang, 2014. "To Ban or Not to Ban: Foreign Lobbying and Cross National Externalities," Cambridge Working Papers in Economics 1402, Faculty of Economics, University of Cambridge.
    6. Sun, Cong & Kahn, Matthew E. & Zheng, Siqi, 2017. "Self-protection investment exacerbates air pollution exposure inequality in urban China," Ecological Economics, Elsevier, vol. 131(C), pages 468-474.
    7. James B. Ang & Per G. Fredriksson, 2017. "Statehood Experience, Legal Traditions, And Climate Change Policies," Economic Inquiry, Western Economic Association International, vol. 55(3), pages 1511-1537, July.

    More about this item


    Environmental regulation; Pollution; Private mitigation; Defensive measures; Avoidance activities; Health; Trade; Dirty goods; Individual welfare; Democracy; Representation theorem; Autocracy;

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth


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