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Trade and Environment revisited: Assessing the Effects of International Technology Spillovers

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  • De Cian, Enrica

Abstract

This papers extends the GTAP-E model to include endogenous technical change. Input augmenting technical change, which in the current GTAP-E version is exogenous, is modified so as to reflect the empirical evidence on international technology spillovers. The empirical evidence support the existence of a positive relationship between capital and energy technical change and imports in capital goods. Using a modified version of the GTAP-E model with technical change, this paper revisits the relationship between trade and the environment when trade is also related to growth through technical change. The first part of the paper develops a simple toy model, with 2 countries producing 2 goods to illustrate how international technology spillovers affect production structure. The second part extends this analysis to a fully-fledged computable general equilibrium models, calibrated on real world data. The major finding are that international technology spillovers play an important role in determining the effects trade liberalization can have on the environment. When spillovers have a positive effect on energy productivity, they tend to reduce the rate of carbon leakage. This result emerges from both the toy model and the GTAP-E model. Results are robust to sensitivity analysis on parameter values.

Suggested Citation

  • De Cian, Enrica, 2008. "Trade and Environment revisited: Assessing the Effects of International Technology Spillovers," Conference papers 331800, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331800
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    References listed on IDEAS

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    1. Ms. Sonali Jain-Chandra & Mr. Ananthakrishnan Prasad, 2005. "The Impact on India of Trade Liberalization in the Textiles and Clothing Sector," IMF Working Papers 2005/214, International Monetary Fund.
    2. Richard Avisse & Michel Fouquin, 2001. "Textiles and Clothing: the End of Discriminatory Protection," La Lettre du CEPII, CEPII research center, issue 198.
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