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Trade, Transboundary Pollution and Market Size

Author

Listed:
  • Forslid, Rikard

    (Dept. of Economics, Stockholm University)

  • Okubo, Toshihiro

    (Keio University)

  • Sanctuary, Mark

    (Dept. of Economics, Stockholm University)

Abstract

This paper uses a monopolistic competitive framework with many sectors to study the impact of trade liberalization on local and global emissions. We focus on the interplay of the pollution haven effect and the home market effect and show how a large-market advantage can counterbalance a high emission tax, implying that trade liberalization leads to lower global emissions. Generally, our results suggest that relative market size, the level of trade costs, the ease of abatement, and the degree of product differentiation at the sector level are relevant variables for empirical studies on trade and pollution.

Suggested Citation

  • Forslid, Rikard & Okubo, Toshihiro & Sanctuary, Mark, 2013. "Trade, Transboundary Pollution and Market Size," Research Papers in Economics 2013:8, Stockholm University, Department of Economics.
    • Handle: RePEc:hhs:sunrpe:2013_0008
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    References listed on IDEAS

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    1. Jota Ishikawa & Toshihiro Okubo, 2008. "Greenhouse-gas Emission Controls and International Carbon Leakage through Trade Liberalization," Global COE Hi-Stat Discussion Paper Series gd08-013, Institute of Economic Research, Hitotsubashi University.
    2. Michael Pfluger, 2001. "Ecological Dumping under Monopolistic Competition," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(4), pages 689-706, December.
    3. Zeng, Dao-Zhi & Zhao, Laixun, 2009. "Pollution havens and industrial agglomeration," Journal of Environmental Economics and Management, Elsevier, vol. 58(2), pages 141-153, September.
    4. Nicole Gürtzgen & Michael Rauscher, 2000. "Environmental Policy, Intra-Industry Trade and Transfrontier Pollution," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 17(1), pages 59-71, September.
    5. Cole, Matthew A. & Elliott, Robert J.R. & Okubo, Toshihiro, 2010. "Trade, environmental regulations and industrial mobility: An industry-level study of Japan," Ecological Economics, Elsevier, vol. 69(10), pages 1995-2002, August.
    6. Josh Ederington & Arik Levinson & Jenny Minier, 2005. "Footloose and Pollution-Free," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 92-99, February.
    7. Rauscher, Michael, 1997. "International Trade, Factor Movements, and the Environment," OUP Catalogue, Oxford University Press, number 9780198290506.
    8. Brian R. Copeland & M. Scott Taylor, 1994. "North-South Trade and the Environment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(3), pages 755-787.
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    Cited by:

    1. Jota Ishikawa & Toshihiro Okubo, 2017. "Greenhouse-Gas Emission Controls and Firm Locations in North–South Trade," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(4), pages 637-660, August.
    2. Shu-Chen Chang, 2015. "The effects of trade liberalization on environmental degradation," Quality & Quantity: International Journal of Methodology, Springer, vol. 49(1), pages 235-253, January.
    3. Shu-Chen Chang & Hsiao-Fen Chang, 2020. "Same Trade Openness Yet Different Environmental Quality — But Why?," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 11(01), pages 1-17, April.

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    More about this item

    Keywords

    market size; emission tax; trade liberalization;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration

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