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Welfare effects of international income transfers under transboundary pollution

Listed author(s):
  • Yasuhiro Takarada
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    This article examines the welfare effects of international income transfers in a two-country, two-good model with transboundary pollution. Most existing studies have assumed that pollution negatively affects the consumer’s utility function instead of influencing production. In our model, there is interindustry interaction caused by pollution. First, we show the effects of aid on each country’s welfare. Second, we show that untied aid improves world welfare if the marginal propensity to consume the polluting good in the donor country is larger than in the recipient country. We also derive the condition for Pareto-improving untied aid. The source of welfare improvement is productivity gains induced by a reduction in pollution. Copyright Springer Japan 2007

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    File URL: http://hdl.handle.net/10.1007/BF03353953
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    Article provided by Springer & Society for Environmental Economics and Policy Studies - SEEPS in its journal Environmental Economics and Policy Studies.

    Volume (Year): 8 (2007)
    Issue (Month): 2 (June)
    Pages: 143-157

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    Handle: RePEc:spr:envpol:v:8:y:2007:i:2:p:143-157
    DOI: 10.1007/BF03353953
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    Web page: http://www.seeps.org/
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    1. Copeland, Brian R. & Taylor, M. Scott, 1999. "Trade, spatial separation, and the environment," Journal of International Economics, Elsevier, vol. 47(1), pages 137-168, February.
    2. Tetsuo Ono, 1998. "Consumption externalities and the effects of international income transfers on the global environment," Journal of Economics, Springer, vol. 68(3), pages 255-269, October.
    3. Brian R. Copeland & M. Scott Taylor, 2004. "Trade, Growth, and the Environment," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 7-71, March.
    4. Djajic, Slobodan & Lahiri, Sajal & Raimondos-Moller, Pascalis, 1999. "Foreign Aid, Domestic Investment and Welfare," Economic Journal, Royal Economic Society, vol. 109(458), pages 698-707, October.
    5. Lahiri, Sajal & Raimondos-Moller, Pascalis & Wong, Kar-yiu & Woodland, Alan D., 2002. "Optimal foreign aid and tariffs," Journal of Development Economics, Elsevier, vol. 67(1), pages 79-99, February.
    6. Takumi Naito, 2003. "Pareto-improving Untied Aid with Environmental Externalities," Journal of Economics, Springer, vol. 80(2), pages 161-169, October.
    7. Unteroberdoerster, Olaf, 2001. "Trade and Transboundary Pollution: Spatial Separation Reconsidered," Journal of Environmental Economics and Management, Elsevier, vol. 41(3), pages 269-285, May.
    8. Bhagwati, Jagdish N & Brecher, Richard A & Hatta, Tatsuo, 1983. "The Generalized Theory of Transfers and Welfare: Bilateral Transfers in a Multilateral World," American Economic Review, American Economic Association, vol. 73(4), pages 606-618, September.
    9. Kenzo Abe & Yasuhiro Takarada, 2005. "Tied Aid and Welfare," Review of International Economics, Wiley Blackwell, vol. 13(5), pages 964-972, November.
    10. Turunen-Red, Arja H. & Woodland, Alan D., 1988. "On the multilateral transfer problem : Existence of Pareto improving international transfers," Journal of International Economics, Elsevier, vol. 25(3-4), pages 249-269, November.
    11. Benarroch, Michael & Thille, Henry, 2001. "Transboundary pollution and the gains from trade," Journal of International Economics, Elsevier, vol. 55(1), pages 139-159, October.
    12. Jagdish N. Bhagwati & Richard A. Brecher & Tatsuo Hatta, 1985. "The Generalized Theory of Transfers and Welfare: Exogenous (policy-Imposed) and Endogenous (Transfer-Induced) Distortion," The Quarterly Journal of Economics, Oxford University Press, vol. 100(3), pages 697-714.
    13. Tetsuo Ono & Yasuo Maeda, 2002. "On the index of environmental awareness," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 5(2), pages 167-178, June.
    14. Yasuhiro Takarada, 2005. "Transboundary Pollution and the Welfare Effects of Technology Transfer," Journal of Economics, Springer, vol. 85(3), pages 251-275, September.
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