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Trade liberalization and the environment: The case of intra-industry trade

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  • K. C. Fung
  • Andrea Maechler

Abstract

While a large body of literature examines the environmental impact of trade on the environment, this discussion focuses largely on the context of inter-industry trade. Empirical evidence has long suggested that an increasing share of international trade takes the form of intra- rather than inter-industry trade. In an attempt to fill this gap, the present paper uses a price-setting duopoly model of intra-industry trade to highlight the environmental consequences of trade liberalization when oligopolistic rivalry rather than comparative advantage drives international trade. We find that the environmental impact of trade liberalization depends mostly on two factors, namely, on the nature of pollution (i.e. whether it is local, transboundary or global) and on which country liberalizes trade (i.e. whether it is the 'clean' country or the 'dirty' country).

Suggested Citation

  • K. C. Fung & Andrea Maechler, 2007. "Trade liberalization and the environment: The case of intra-industry trade," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 16(1), pages 53-69.
  • Handle: RePEc:taf:jitecd:v:16:y:2007:i:1:p:53-69
    DOI: 10.1080/09638190601165509
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    Citations

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    Cited by:

    1. Saeed Solaymani & Mehdi Shokrinia, 2016. "Economic and environmental effects of trade liberalization in Malaysia," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 18(1), pages 101-120, October.
    2. Leonard Wang & Ya-Chin Wang & Lihong Zhao, 2009. "Trade liberalization, intra-industry trade and the environment: competition mode and the order of firms’ moves," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 56(2), pages 133-144, June.
    3. Harvey E. Lapan & Shiva Sikdar, 2017. "Can Trade Be Good for the Environment?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(2), pages 267-288, April.
    4. repec:eee:jeeman:v:83:y:2017:i:c:p:50-67 is not listed on IDEAS
    5. Horatiu A. Rus, 2016. "Renewable Resources, Pollution and Trade," Review of International Economics, Wiley Blackwell, vol. 24(2), pages 364-391, May.
    6. Roy, Jayjit, 2017. "On the environmental consequences of intra-industry trade," Journal of Environmental Economics and Management, Elsevier, vol. 83(C), pages 50-67.

    More about this item

    Keywords

    Trade; environment; intra-industry trade;

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