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Environmental Policy in Open Economies and Monopolistic Competition

  • Alexander Haupt


This paper analyses the implications of international trade for non-cooperative environmental policy in the case of local production externalities. A particular focus is on the potential effects of regulations on the variety of goods and the resulting international spillover caused by trade. A tougher domestic standard negatively affects the utility of the households abroad, since such a policy reduces their variety of imports (due to fewer domestic product inventions) or their consumption of each imported brand (due to higher import prices). Ignoring the negative spillover, non-cooperative governments implement inefficiently strict standards in equilibrium. In contrast to this clear-cut inefficiency result, the impact of international trade on the state of the environment is ambiguous. Copyright Springer 2006

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Article provided by European Association of Environmental and Resource Economists in its journal Environmental & Resource Economics.

Volume (Year): 33 (2006)
Issue (Month): 2 (02)
Pages: 143-167

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Handle: RePEc:kap:enreec:v:33:y:2006:i:2:p:143-167
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  1. Susanne Dröge & Philipp Schröder, 2005. "How to Turn an Industry Green: Taxes versus Subsidies," Journal of Regulatory Economics, Springer, vol. 27(2), pages 177-202, November.
  2. Copeland,B.R. & Taylor,M.S., 2000. "Free trade and global warming : a trade theory view of the Kyoto protocol," Working papers 4, Wisconsin Madison - Social Systems.
  3. Nicole Gürtzgen & Michael Rauscher, 2000. "Environmental Policy, Intra-Industry Trade and Transfrontier Pollution," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 17(1), pages 59-71, September.
  4. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
  5. Michael Rauscher, 1995. "Environmental regulation and the location of polluting industries," International Tax and Public Finance, Springer, vol. 2(2), pages 229-244, August.
  6. Carlton, Dennis W & Loury, Glenn C, 1986. "The Limitation of Pigouvian Taxes as a Long-run Remedy for Externalities: An Extension of Results," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 631-34, August.
  7. Carlton, Dennis W & Loury, Glenn C, 1980. "The Limitations of Pigouvian Taxes as a Long-Run Remedy for Externalities," The Quarterly Journal of Economics, MIT Press, vol. 95(3), pages 559-66, November.
  8. Hoel, Michael, 1997. " Environmental Policy with Endogenous Plant Locations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(2), pages 241-59, June.
  9. Rauscher, Michael, 1997. "International Trade, Factor Movements, and the Environment," OUP Catalogue, Oxford University Press, number 9780198290506.
  10. Markusen, James R. & Morey, Edward R. & Olewiler, Nancy, 1995. "Competition in regional environmental policies when plant locations are endogenous," Journal of Public Economics, Elsevier, vol. 56(1), pages 55-77, January.
  11. Krutilla, Kerry, 1991. "Environmental regulation in an open economy," Journal of Environmental Economics and Management, Elsevier, vol. 20(2), pages 127-142, March.
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