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Transboundary pollution, R&D spillovers and international trade

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  • Slim Ben Youssef

Abstract

We consider a symmetric three-stage game played by a pair of regulator-firm hierarchies to capture the scale and technology effects. Each firm produces one good sold on the market. The production process generates pollution characterized by a fixed emission/output ratio, and cross-borders. Firms can invest in R&D in order to lower their emission/output ratio, and this activity is characterized by positive R&D spillovers. We show that R&D spillovers and the competition of firms on the common market help non-cooperating countries to internalize transboundary pollution more efficiently. Consequently, in most cases, when the positive externality increases, the levels of R&D and production increase while pollution decreases, implying an increase of the social welfare. However, in some other cases, pollution under common market increases with the R&D externality implying a decrease of the social welfare. Opening markets to the international trade leads to more investment in R&D and more production. In most cases, pollution under common market is lower than under autarky, implying a greater social welfare. Nevertheless, in some other cases, pollution under common market is higher than under autarky implying that opening markets deteriorates social welfare.
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  • Slim Ben Youssef, 2009. "Transboundary pollution, R&D spillovers and international trade," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 43(1), pages 235-250, March.
    • Handle: RePEc:spr:anresc:v:43:y:2009:i:1:p:235-250
    DOI: 10.1007/s00168-007-0198-3
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    References listed on IDEAS

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    1. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-1137, December.
    2. Santore, Rudy & Robison, H. David & Klein, Yehuda, 2001. "Strategic state-level environmental policy with asymmetric pollution spillovers," Journal of Public Economics, Elsevier, vol. 80(2), pages 199-224, May.
    3. Kjetil Bjorvatn & Guttorm Schjelderup, 2002. "Tax Competition and International Public Goods," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(2), pages 111-120, March.
    4. Copeland, Brian R & Taylor, M Scott, 1995. "Trade and Transboundary Pollution," American Economic Review, American Economic Association, vol. 85(4), pages 716-737, September.
    5. Barbara J. Spencer & James A. Brander, 1983. "International R & D Rivalry and Industrial Strategy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 50(4), pages 707-722.
    6. Cremer, Helmuth & Gahvari, Firouz, 2004. "Environmental taxation, tax competition, and harmonization," Journal of Urban Economics, Elsevier, vol. 55(1), pages 21-45, January.
    7. Werner Antweiler & Brian R. Copeland & M. Scott Taylor, 2001. "Is Free Trade Good for the Environment?," American Economic Review, American Economic Association, vol. 91(4), pages 877-908, September.
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    Citations

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    Cited by:

    1. Michael Hoel & Rolf Golombek, 2004. "Climate Agreements and Technology Policy," Working Papers 2004.90, Fondazione Eni Enrico Mattei.
    2. Ben Youssef, Slim & Zaccour, Georges, 2014. "Absorptive Capacity, R&D Spillovers, Emissions Taxes and R&D Subsidies," Strategic Behavior and the Environment, now publishers, vol. 4(1), pages 41-58, April.
    3. Ben Youssef, Slim & Dinar, Zeineb, 2009. "Régulation d'un duopole et R&D environnementale [Regulation of a duopoly and environmental R&D]," MPRA Paper 22385, University Library of Munich, Germany, revised Apr 2010.
    4. Ben Jebli, Mehdi & Ben Youssef, Slim, 2014. "Timing of adoption of clean technologies, transboundary pollution and international trade," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 8, pages 1-31.
    5. Golombek, Rolf & Hoel, Michael, 2004. "Unilateral emission reductions when there are cross -country technology spillovers," Memorandum 17/2004, Oslo University, Department of Economics.
    6. Zeineb Dinar, 2014. "Transboundary Pollution, R&D Spillovers, Absorptive Capacity and International Trade," International Journal of Economics and Financial Issues, Econjournals, vol. 4(3), pages 501-513.
    7. Shuhua Chang & Suresh P. Sethi & Xinyu Wang, 2018. "Optimal Abatement and Emission Permit Trading Policies in a Dynamic Transboundary Pollution Game," Dynamic Games and Applications, Springer, vol. 8(3), pages 542-572, September.
    8. Dinar, Zeineb, 2013. "Transboundary pollution, R&D spillovers, absorptive capacity and international trade," Economics Discussion Papers 2013-23, Kiel Institute for the World Economy (IfW Kiel).
    9. Li, Shaoshuai & Li, Zhigang & Ni, Jinlan & Yuan, Jia, 2023. "Growing pains for others: Using holidays to identify the pollution spillover between China and South Korea," China Economic Review, Elsevier, vol. 77(C).
    10. Chang, Shuhua & Qin, Weihua & Wang, Xinyu, 2018. "Dynamic optimal strategies in transboundary pollution game under learning by doing," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 490(C), pages 139-147.
    11. Shiyue Zhang & Alan R. Collins & Xiaoli L. Etienne & Rijia Ding, 2021. "The Environmental Effects of International Trade in China: Measuring the Mediating Effects of Technology Spillovers of Import Trade on Industrial Air Pollution," Sustainability, MDPI, vol. 13(12), pages 1-25, June.
    12. Ben Youssef, Slim, 2009. "Transboundary Pollution and Absorptive Capacity," MPRA Paper 17158, University Library of Munich, Germany.

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    More about this item

    Keywords

    D62; F12; H21; O32;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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