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Trade and Environmental Distortions: Coordinated Intervention

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  • Zhao, Jinhua

Abstract

Free trade may not improve welfare when environmental distortions exist. We study the coordination of trade and environmental policies when the distortion is loose property rights governing resources. Using the dual approach of Dixit and Norman (1980), we trade out ‘iso-welfare’ curves in the space of the degree of environment distortion and the level of the import tariff. We use these curves to find necessary and sufficient conditions for disproportionate reforms, piecemeal or discrete, to be welfare improving. We also find that the needed reduction in the distortion to make trade welfare improving increases as the environmental stock increases, the productivity of the environmentally intensive good increases, or when the country is a large exporter of the environmentally intensive good.
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  • Zhao, Jinhua, 2000. "Trade and Environmental Distortions: Coordinated Intervention," Staff General Research Papers Archive 5122, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:5122
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    Cited by:

    1. M. Zillur Rahman, 2013. "Relationship between Trade Openness and Carbon Emission: A Case of Bangladesh," Journal of Empirical Economics, Research Academy of Social Sciences, vol. 1(4), pages 126-134.
    2. Daniel C. Esty, 2001. "Bridging the Trade-Environment Divide," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 113-130, Summer.

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