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Market integration, environmental policy, and transboundry pollution from consumption


  • Kenji Fujiwara

    () (Kwansei Gakuin University)


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.

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  • 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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    1. Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2003. "Vertical Integration and Distance to Frontier," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 630-638, 04/05.
    2. Alfred D. Chandler, 1969. "Strategy and Structure: Chapters in the History of the American Industrial Enterprise," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262530090, January.
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    transboundary pollution; consumption-generated pollution; gains from trade; environmental policy;

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