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Trade, Resource Use and Pollution: A Synthesis

Author

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  • Gang Li

    (Toyo University)

  • Akihiko Yanase

    (Nagoya University)

Abstract

We develop a two-sector dynamic model of trade and the environment. Both resource-good and manufacturing sectors generate environmental burdens that can adversely affect the environment in a country over time. The resource-good sector is environmentally sensitive, with its productivity suffering in line with declines in the environmental stock. Countries can be categorized into two types: one in which the resource-good sector is more environmentally harmful than the manufacturing sector, and another in which the opposite is true. At every point in time, labor allocations and specialization patterns under free trade are dependent on country size, technology, household preferences, and environmental stocks. Trading countries’ types have implications for the dynamics of environmental stocks and the corresponding environmental and welfare consequences of trade. If two trading countries are of the same type, one country exports its dirtier goods and the other must export its cleaner goods; consequently, at least one country gains from trade. If the two countries are of different types, they can export their respective dirtier goods and may both lose from trade.

Suggested Citation

  • Gang Li & Akihiko Yanase, 2022. "Trade, Resource Use and Pollution: A Synthesis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 83(3), pages 861-901, November.
    • Handle: RePEc:kap:enreec:v:83:y:2022:i:3:d:10.1007_s10640-022-00713-x
    DOI: 10.1007/s10640-022-00713-x
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    References listed on IDEAS

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    More about this item

    Keywords

    Country type; Environmental stock; Long-run gains from trade; Pollution; Resource extraction; World specialization pattern;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q27 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Issues in International Trade

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