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Does tighter environmental policy lead to a comparative advantage in less polluting goods?

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  • Swee Chua

Abstract

A two-factor model is developed to analyze the effects of environmental policy on patterns of comparative advantage. A pollution tax affects goods' prices via: (1) the tax burdens on each good, which depend on their respective polluting tendencies; and (2) changes in factor returns due to increased abatement activity. The good intensive in the factor whose returns have risen will tend to face a price increase, ceteris paribus. The net outcome depends on both effects. A higher tax will not always raise (lower) the autarky price of the more (less) polluting good. Therefore a country with the higher (lower) tax does not always have a comparative advantage in the less (more) polluting good. Copyright 2003, Oxford University Press.

Suggested Citation

  • Swee Chua, 2003. "Does tighter environmental policy lead to a comparative advantage in less polluting goods?," Oxford Economic Papers, Oxford University Press, vol. 55(1), pages 25-35, January.
    • Handle: RePEc:oup:oxecpp:v:55:y:2003:i:1:p:25-35
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    Cited by:

    1. Cai, Jie & Stoyanov, Andrey, 2023. "Progressive income tax and comparative advantage in trade," Economic Modelling, Elsevier, vol. 129(C).
    2. Fullerton, Don & Heutel, Garth, 2007. "The general equilibrium incidence of environmental taxes," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 571-591, April.
    3. Bourgeon, Jean-Marc & Ollivier, Hélène, 2012. "Is bioenergy trade good for the environment?," European Economic Review, Elsevier, vol. 56(3), pages 411-421.
    4. McAusland, Carol, 2021. "Carbon taxes and footprint leakage: Spoilsport effects," Journal of Public Economics, Elsevier, vol. 204(C).
    5. Elliott, Joshua & Fullerton, Don, 2014. "Can a unilateral carbon tax reduce emissions elsewhere?," Resource and Energy Economics, Elsevier, vol. 36(1), pages 6-21.
    6. Xiao Chen & Alan Woodland, 2013. "International trade and climate change," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(3), pages 381-413, June.
    7. Catia Montagna & Avanti Nisha Pinto & Nikolaos Vlassis, 2020. "Welfare and Trade Effects of International Environmental Agreements," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 76(2), pages 331-345, July.
    8. Don Fullerton & Daniel H. Karney, 2018. "Potential State‐Level Carbon Revenue Under The Clean Power Plan," Contemporary Economic Policy, Western Economic Association International, vol. 36(1), pages 149-166, January.
    9. Frankel, Jeffrey A., 2009. "Environmental Effects of International Trade," Scholarly Articles 4481652, Harvard Kennedy School of Government.
    10. McAusland, Carol, 2008. "Trade, politics, and the environment: Tailpipe vs. smokestack," Journal of Environmental Economics and Management, Elsevier, vol. 55(1), pages 52-71, January.
    11. Nicola Coniglio & Kenji Kondoh, 2012. "Subsidy to environmental industry in a North-South model of trans-boundary pollution, trade and migration," ERSA conference papers ersa12p74, European Regional Science Association.
    12. Don Fullerton & Garth Heutel, 2010. "The General Equilibrium Incidence of Environmental Mandates," American Economic Journal: Economic Policy, American Economic Association, vol. 2(3), pages 64-89, August.
    13. 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.
    14. Kenji Kondo, 2013. "Renewable Resources, Environmental Pollution, and International Migration," ERSA conference papers ersa13p33, European Regional Science Association.
    15. Sakamoto, Tomoyuki & Managi, Shunsuke, 2017. "New evidence of environmental efficiency on the export performance," Applied Energy, Elsevier, vol. 185(P1), pages 615-626.
    16. Chi-Chur Chao & Eden S. H. Yu, 2015. "Environmental Impacts of Tariff and Tax Reforms Under Origin and Destination Principles," Pacific Economic Review, Wiley Blackwell, vol. 20(2), pages 310-322, May.
    17. McGinty Matthew, 2008. "An Evolutionary Race to the Top: Trade, Oligopoly and Convex Pollution Damage," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-26, July.
    18. Chang, Juin-Jen & Wang, Wei-Neng & Shieh, Jhy-Yuan, 2018. "Environmental rebounds/backfires: Macroeconomic implications for the promotion of environmentally-friendly products," Journal of Environmental Economics and Management, Elsevier, vol. 88(C), pages 35-68.
    19. Yasuyuki Sugiyama & Muneyuki Saito, 2016. "Environmental Goods and Measures for Their Promotion: An Analysis Using a Fair Wage Model," Pacific Economic Review, Wiley Blackwell, vol. 21(5), pages 581-602, December.

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