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Market integration, environmental policy, and transboundry pollution from consumption

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  • Kenji Fujiwara

    (Kwansei Gakuin University)

Abstract

Recent empirics report that transport cost reductions signi cantly contribute to rapidly growing world trade. This paper develops a reciprocal market model of intra-industry trade with transboundary pollution from consumption to consider how market integration in the form of transport cost reductions a ects the noncooperative choice of an environmental policy and the equilibrium welfare. I show that market integration can improve welfare locally, but that welfare under any non-prohibitive trade cost can not be higher than welfare under autarky. This possibility of trade losses exhibits a sharp contrast to the case of production-generated pollution.

Suggested Citation

  • Kenji Fujiwara, 2010. "Market integration, environmental policy, and transboundry pollution from consumption," Discussion Paper Series 62, School of Economics, Kwansei Gakuin University, revised Nov 2010.
    • Handle: RePEc:kgu:wpaper:62
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    References listed on IDEAS

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    Keywords

    transboundary pollution; consumption-generated pollution; gains from trade; environmental policy;
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