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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. 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.
    2. ISHIKAWA Jota & OKUBO Toshihiro, 2009. "Greenhouse-Gas Emission Controls and International Carbon Leakage through Trade Liberalization," Discussion papers 09008, Research Institute of Economy, Trade and Industry (RIETI).
    3. Rauscher, Michael, 1997. "International Trade, Factor Movements, and the Environment," OUP Catalogue, Oxford University Press, number 9780198290506.
    4. Brian R. Copeland & M. Scott Taylor, 1994. "North-South Trade and the Environment," The Quarterly Journal of Economics, Oxford University Press, vol. 109(3), pages 755-787.
    5. Jota Ishikawa & Yoichi Sugita & Laixun Zhao, 2011. "Commercial Policy and Foreign Ownership," Review of International Economics, Wiley Blackwell, pages 300-312.
    6. Pfluger, Michael, 2001. " Ecological Dumping under Monopolistic Competition," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(4), pages 689-706, December.
    7. 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.
    8. Nicole G├╝rtzgen & Michael Rauscher, 2000. "Environmental Policy, Intra-Industry Trade and Transfrontier Pollution," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 59-71.
    9. 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.
    10. Mitchener, Kris James & Shizume, Masato & Weidenmier, Marc D., 2010. "Why did Countries Adopt the Gold Standard? Lessons from Japan," The Journal of Economic History, Cambridge University Press, vol. 70(01), pages 27-56, March.
    11. Jota Ishikawa & Toshihiro Okubo, 2008. "Greenhouse-gas Emission Controls and International Carbon Leakage through Trade Liberalization," Discussion Paper Series 231, Research Institute for Economics & Business Administration, Kobe University.
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    Cited by:

    1. ISHIKAWA Jota & OKUBO Toshihiro, 2013. "Greenhouse Gas Emission Controls and Firm Locations in North-South Trade," Discussion papers 13045, Research Institute of Economy, Trade and Industry (RIETI).
    2. repec:kap:enreec:v:67:y:2017:i:4:d:10.1007_s10640-015-9991-0 is not listed on IDEAS
    3. Shu-Chen Chang, 2015. "The effects of trade liberalization on environmental degradation," Quality & Quantity: International Journal of Methodology, Springer, pages 235-253.

    More about this item

    Keywords

    market size; emission tax; trade liberalization;

    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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