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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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    1. Brander, James & Krugman, Paul, 1983. "A 'reciprocal dumping' model of international trade," Journal of International Economics, Elsevier, vol. 15(3-4), pages 313-321, November.
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    3. Bagliani, Marco & Bravo, Giangiacomo & Dalmazzone, Silvana, 2008. "A consumption-based approach to environmental Kuznets curves using the ecological footprint indicator," Ecological Economics, Elsevier, vol. 65(3), pages 650-661, April.
    4. Kenji Fujiwara, 2010. "Strategic Environmental Policies and the Gains from Trade Liberalization," Review of Development Economics, Wiley Blackwell, vol. 14(2), pages 360-373, May.
    5. Kayalica M. Ozgur & Kayalica Olgay, 2005. "Transboundary Pollution From Consumption In A Reciprocal Dumping Model," Global Economy Journal, De Gruyter, vol. 5(2), pages 1-16, June.
    6. Barrett, Scott, 1994. "Strategic environmental policy and intrenational trade," Journal of Public Economics, Elsevier, vol. 54(3), pages 325-338, July.
    7. Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, vol. 11(1), pages 1-14, February.
    8. Brian R. Copeland & M. Scott Taylor, 1995. "Trade and the Environment: A Partial Synthesis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(3), pages 765-771.
    9. Burguet, Roberto & Sempere, Jaume, 2003. "Trade liberalization, environmental policy, and welfare," Journal of Environmental Economics and Management, Elsevier, vol. 46(1), pages 25-37, July.
    10. Ulph, Alistair, 1996. "Environmental Policy and International Trade when Governments and Producers Act Strategically," Journal of Environmental Economics and Management, Elsevier, vol. 30(3), pages 265-281, May.
    11. Odd Rune Straume, 2006. "Product Market Integration and Environmental Policy Coordination in An International Duopoly," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 34(4), pages 535-563, August.
    12. Conrad Klaus, 1993. "Taxes and Subsidies for Pollution-Intensive Industries as Trade Policy," Journal of Environmental Economics and Management, Elsevier, vol. 25(2), pages 121-135, September.
    13. Baier, Scott L. & Bergstrand, Jeffrey H., 2001. "The growth of world trade: tariffs, transport costs, and income similarity," Journal of International Economics, Elsevier, vol. 53(1), pages 1-27, February.
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    Keywords

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

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