Trade Sanctions and Green Trade Liberalization
This paper studies the impact of a WTO withdrawal of trade concessions against countries that fail to respect globally recognized environmental standards. We show that a punishing tariff can be effective when environmental and trade policies are endogenous. When required standards lie within a reasonable range, compliance along with free trade as a reward is the unique equilibrium outcome. A positive optimal tariff in the case of non-compliance prevents pollution-motivated delocation, but only works as a successful credible threat and does not emerge in equilibrium. Results are consistent with broad empirical evidence that disputes the pollution haven hypothesis and suggests capital movements to be non-pollution related.
|Date of creation:||Mar 2008|
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200317, School of Economics, University College Dublin.
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"Environmental Policy when Market Structure and Plant Locations Are Endogenous,"
Journal of Environmental Economics and Management,
Elsevier, vol. 24(1), pages 69-86, January.
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"Pollution Havens and Foreign Direct Investment: Dirty Secret or Popular Myth?,"
NBER Working Papers
8465, National Bureau of Economic Research, Inc.
- Javorcik Beata Smarzynska & Wei Shang-Jin, 2003. "Pollution Havens and Foreign Direct Investment: Dirty Secret or Popular Myth?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(2), pages 1-34, December.
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- Jean-Marie Grether & Jaime de Melo, 2003.
"Globalization and Dirty Industries: Do Pollution Havens Matter?,"
NBER Working Papers
9776, National Bureau of Economic Research, Inc.
- de Melo, Jaime & Grether, Jean-Marie, 2003. "Globalization and Dirty Industries: Do Pollution Havens Matter?," CEPR Discussion Papers 3932, C.E.P.R. Discussion Papers.
- Hoel, Michael, 1997. " Environmental Policy with Endogenous Plant Locations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(2), pages 241-259, June.
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