Global Pollution: A Heckscher-Ohlin-Samuelson Model of Pigouvian Taxation
It could be inferred from the externality literature that, in the absence of lump sum transfers between countries, global Pigouvian taxation would make pollution-intensive countries worse-off. This paper uses the "strong version" of the Heckscher-Ohlin-Samuelson model to demonstrate that a uniform Pigouvian tax shifts the terms-of-trade in favor of the polluting good so that on balance a more polluting country could be better-off and a less polluting country worse-off. This result is consistent with some empirical observations on environmental policy in industrialized countries as compared with that in newly developing countries.
Volume (Year): 17 (1991)
Issue (Month): 3 (Jul-Sep)
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- Merrifield, John D., 1988. "The impact of selected abatement strategies on transnational pollution, the terms of trade, and factor rewards: A general equilibrium approach," Journal of Environmental Economics and Management, Elsevier, vol. 15(3), pages 259-284, September.
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- Hahn, Robert W, 1989. "Economic Prescriptions for Environmental Problems: How the Patient Followed the Doctor's Orders," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 95-114, Spring.
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