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Trade Policy and Natural Resource Use: The Case for a Quantitative Restriction

  • Susana Ferreira

    ()

This paper presents a simple way for countries to reap the benefits of trade liberalization without exacerbating problems of overexploitation of natural resources. In the context of a Ricardo–Viner dynamic trade model, it is shown that when a binding quantitative restriction regulates extraction of a natural resource, free trade is optimal. This is true even if the quantitative restriction is not optimal. In contrast, in the presence of a suboptimal tax (including a zero tax in the special case of open access) on the use of natural resources, trade liberalization is not necessarily welfare improving. Copyright Springer Science+Business Media, Inc. 2007

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File URL: http://hdl.handle.net/10.1007/s10640-006-9030-2
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Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 37 (2007)
Issue (Month): 2 (June)
Pages: 361-376

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Handle: RePEc:kap:enreec:v:37:y:2007:i:2:p:361-376
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100263

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