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Environmental Impacts of a North American Free Trade Agreement

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  • Gene M. Grossman
  • Alan B. Krueger

Abstract

A reduction in trade barriers generally will affect the environment by expanding the scale of economic activity, by altering the composition of economic activity, and by bringing about a change in the techniques of production. We present empirical evidence to assess the relative magnitudes of these three effects as they apply to further trade liberalization in Mexico. In Section 1. we use comparable measures of three air pollutants in a cross-section of urban areas located in 42 countries to study the relationship between air quality and economic growth. We find for two pollutants (sulfur dioxide and "smoke") that concentrations increase with per capita GDP at low levels of national income, but decrease with GD? growth at higher levels of income. Section 2 studies the determinants of the industry pattern of U.S. imports from Mexico and of value added by Mexico's maquiladora sector. We investigate whether the size of pollution abatement costs in the U.S. industry influences the pattern of international trade and investment. Finally, in Section 3, we use the results from a computable general equilibrium model to study the likely compositional effect of a NAFTA on pollution in Mexico.

Suggested Citation

  • Gene M. Grossman & Alan B. Krueger, 1991. "Environmental Impacts of a North American Free Trade Agreement," NBER Working Papers 3914, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3914
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    References listed on IDEAS

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    1. Krueger, Alan B & Burton, John F, Jr, 1990. "The Employers' Costs of Workers' Compensation Insurance: Magnitudes, Determinants, and Public Policy," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 228-240, May.
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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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