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Environmental Impacts of a North American Free Trade Agreement

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  • Grossman, G.M
  • Krueger, A.B.

Abstract

In general, a reduction in trade barriers will affect the environment by expanding the scale of economic activity, by altering the composition of economic activity and by initiating a change in the techniques of production. We present empirical evidence to assess the relative magnitudes of these three effects as they apply to further trade liberalization in Mexico. We first use comparable measures of three air pollutants in a cross-section of urban areas located in 42 countries to study the relationship between air quality and economic growth. We find for two pollutants (sulphur dioxide and `smoke') that concentrations increase with per capita GDP at low levels of national income, but decrease with GDP growth at higher levels of income. We then study the determinants of the industry pattern of US imports from Mexico and of value added by Mexico's maquiladora sector. We investigate whether the size of pollution abatement costs in US industry influences the pattern of international trade and investment. Finally, we use the results from a computable general equilibrium model to study the likely compositional effect of a North American Free Trade Agreement (NAFTA) on pollution in Mexico.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Grossman, G.M & Krueger, A.B., 1991. "Environmental Impacts of a North American Free Trade Agreement," Papers 158, Princeton, Woodrow Wilson School - Public and International Affairs.
    • Handle: RePEc:fth:priwpu:158
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    References listed on IDEAS

    as
    1. Harkness, Jon P, 1978. "Factor Abundance and Comparative Advantage," American Economic Review, American Economic Association, vol. 68(5), pages 784-800, December.
    2. Drusilla K. Brown & Alan V. Deardorff & Robert M. Stern, 2011. "A North American Free Trade Agreement: Analytical Issues and a Computational Assessment," World Scientific Book Chapters, in: Robert M Stern (ed.), Comparative Advantage, Growth, And The Gains From Trade And Globalization A Festschrift in Honor of Alan V Deardorff, chapter 40, pages 557-575, World Scientific Publishing Co. Pte. Ltd..
    3. McGuire, Martin C., 1982. "Regulation, factor rewards, and international trade," Journal of Public Economics, Elsevier, vol. 17(3), pages 335-354, April.
    4. Horst Siebert, 1977. "Environmental Quality And The Gains From Trade," Kyklos, Wiley Blackwell, vol. 30(4), pages 657-673, November.
    5. Krueger, Alan B & Burton, John F, Jr, 1990. "The Employers' Costs of Workers' Compensation Insurance: Magnitudes, Determinants, and Public Policy," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 228-240, May.
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    More about this item

    Keywords

    economic growth ; means of production ; trade ; air pollution;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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