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Environmental Policy, Intra-Industry Trade and Transfrontier Pollution

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  • Nicole Gürtzgen
  • Michael Rauscher

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Abstract

The paper discusses effects of domestic environmental policy on foreignemissions and on transboundary pollution. We use a Dixit-Stiglitz typemodel of monopolistic competition with an endogenous number of firms.Production generates environmental externalities which spill over to theother country. It is shown that environmental policy has an impact onmarket structure at home and abroad. These market structure effectsinduce changes in emissions abroad. In contrast to what has been derivedin earlier contributions, it turns out to be possible that tighterenvironmental standards at home lead to less emissions abroad. The paperderives these results and provides the economic intuition behind them.Finally, conditions for optimal environmental policies are derived. Copyright Kluwer Academic Publishers 2000

Suggested Citation

  • Nicole Gürtzgen & Michael Rauscher, 2000. "Environmental Policy, Intra-Industry Trade and Transfrontier Pollution," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 17(1), pages 59-71, September.
  • Handle: RePEc:kap:enreec:v:17:y:2000:i:1:p:59-71
    DOI: 10.1023/A:1008340519683
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    References listed on IDEAS

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    1. Conrad, Klaus & Wang, Jianmin, 1993. "The effect of emission taxes and abatement subsidies on market structure," International Journal of Industrial Organization, Elsevier, vol. 11(4), pages 499-518.
    2. Markusen James R. & Morey Edward R. & Olewiler Nancy D., 1993. "Environmental Policy when Market Structure and Plant Locations Are Endogenous," Journal of Environmental Economics and Management, Elsevier, vol. 24(1), pages 69-86, January.
    3. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    4. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, April.
    5. Katsoulacos, Yannis & Xepapadeas, Anastasios, 1995. " Environmental Policy under Oligopoly with Endogenous Market Structure," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(3), pages 411-420, September.
    6. Markusen, James R., 1975. "International externalities and optimal tax structures," Journal of International Economics, Elsevier, vol. 5(1), pages 15-29, February.
    7. Daniel Gros, 1987. "Protectionism in a Framework with Intra-Industry Trade: Tariffs, Quotas, Retaliation, and Welfare Losses (Le protectionnisme dans un cadre faisant intervenir les échanges de produits analogues: droit," IMF Staff Papers, Palgrave Macmillan, vol. 34(1), pages 86-114, March.
    8. Rauscher, Michael, 2005. "International Trade, Foreign Investment, and the Environment," Handbook of Environmental Economics,in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 3, chapter 27, pages 1403-1456 Elsevier.
    9. Spulber, Daniel F., 1985. "Effluent regulation and long-run optimality," Journal of Environmental Economics and Management, Elsevier, vol. 12(2), pages 103-116, June.
    10. James R. Markusen & Edward R. Morey & Nancy Olewiler, 1992. "Noncooperative Equilibria in Regional Environmental Policies When Plant Locations are Endogenous," NBER Working Papers 4051, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Golombek, Rolf & Hoel, Michael, 2004. "Unilateral emission reductions when there are cross -country technology spillovers," Memorandum 17/2004, Oslo University, Department of Economics.
    2. Kathy Baylis & Don Fullerton & Daniel H. Karney, 2014. "Negative Leakage," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(1), pages 51-73.
    3. Jota Ishikawa & Toshihiro Okubo, 2017. "Greenhouse-Gas Emission Controls and Firm Locations in North–South Trade," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(4), pages 637-660, August.
    4. Elliott, Joshua & Fullerton, Don, 2014. "Can a unilateral carbon tax reduce emissions elsewhere?," Resource and Energy Economics, Elsevier, vol. 36(1), pages 6-21.
    5. Anriquez, Gustavo, 2002. "Trade And The Environment: An Economic Literature Survey," Working Papers 28598, University of Maryland, Department of Agricultural and Resource Economics.
    6. Rikard Forslid & Toshihiro Okubo & Mark Sanctuary, 2017. "Trade Liberalization, Transboundary Pollution, and Market Size," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 4(3), pages 927-957.
    7. Udo Kreickemeier & Philipp M. Richter, 2014. "Trade and the Environment: The Role of Firm Heterogeneity," Review of International Economics, Wiley Blackwell, vol. 22(2), pages 209-225, May.
    8. Harvey E. Lapan & Shiva Sikdar, 2017. "Can Trade Be Good for the Environment?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(2), pages 267-288, April.
    9. Aronsson, Thomas & Sjögren, Tomas, 2017. "Optimal Taxation, Redistribution, and Environmental Externalities," Umeå Economic Studies 950, Umeå University, Department of Economics.
    10. Levy, Ting & Dinopoulos, Elias, 2016. "Global environmental standards with heterogeneous polluters," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 482-498.
    11. repec:eee:jeeman:v:83:y:2017:i:c:p:50-67 is not listed on IDEAS
    12. Forslid, Rikard & Okubo, Toshihiro & Sanctuary, Mark, 2013. "Trade, Transboundary Pollution and Market Size," CEPR Discussion Papers 9412, C.E.P.R. Discussion Papers.
    13. Aronsson, Thomas & Persson, Lars & Sjögren, Tomas, 2006. "Optimal Taxation and Transboundary Externalities - Are Endogenous World Market Prices Important?," Umeå Economic Studies 699, Umeå University, Department of Economics.
    14. Requate, Till, 2005. "Environmental Policy under Imperfect Competition: A Survey," Economics Working Papers 2005-12, Christian-Albrechts-University of Kiel, Department of Economics.
    15. Alexander Haupt, 2006. "Environmental Policy in Open Economies and Monopolistic Competition," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 33(2), pages 143-167, February.
    16. Zhu, Xueqin & van Ierland, Ekko, 2006. "The enlargement of the European Union: Effects on trade and emissions of greenhouse gases," Ecological Economics, Elsevier, vol. 57(1), pages 1-14, April.
    17. Lai, Yu-Bong & Hu, Chia-Hsien, 2008. "Trade agreements, domestic environmental regulation, and transboundary pollution," Resource and Energy Economics, Elsevier, vol. 30(2), pages 209-228, May.
    18. Benarroch, Michael & Weder, Rolf, 2006. "Intra-industry trade in intermediate products, pollution and internationally increasing returns," Journal of Environmental Economics and Management, Elsevier, vol. 52(3), pages 675-689, November.
    19. Roy, Jayjit, 2017. "On the environmental consequences of intra-industry trade," Journal of Environmental Economics and Management, Elsevier, vol. 83(C), pages 50-67.

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