Trade, Transboundary Pollution and Market Size
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.
|Date of creation:||17 Apr 2013|
|Contact details of provider:|| Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden|
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