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Unprotected Resources and Voracious World Markets

  • Shogren, Jason
  • Margolis, Michael

The Theory of the Second Best implies that any country with less-than-ideal resources can lose from international trade. Recently it has been suggested this means the South (poor countries) are better off suppressing trade with the North, especially trade in natural resource products, since the North has better developed rights to protect its natural resources. Here we show that the suppression of such trade may also impede the development of property rights in the South, but that even taking this into account, trade liberalization need not improve Southern welfare. We find that within a cone of world prices on the boundary of which lies the South’s autarky price vector, welfare losses still occur even when local governments in the South make optimal choices to enclose the hinterlands. Corollary to the losses, the South can gain from tariffs or quotas and, within a proper subset of the cone of loss, can suffer when the prices of its exports rise.

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Paper provided by Resources For the Future in its series Discussion Papers with number dp-02-30.

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Date of creation: 01 Jun 2002
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Handle: RePEc:rff:dpaper:dp-02-30
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  1. Elhanan Helpman, 1998. "The Structure of Foreign Trade," NBER Working Papers 6752, National Bureau of Economic Research, Inc.
  2. Chichilnisky, Graciela, 1994. "North-South Trade and the Global Environment," American Economic Review, American Economic Association, vol. 84(4), pages 851-74, September.
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  7. de Meza, David & Gould, J R, 1992. "The Social Efficiency of Private Decisions to Enforce Property Rights," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 561-80, June.
  8. Krishna, Pravin & Panagariya, Arvind, 2000. "A unification of second best results in international trade," Journal of International Economics, Elsevier, vol. 52(2), pages 235-257, December.
  9. Anne O. Krueger, 1997. "Trade Policy and Economic Development: How We Learn," NBER Working Papers 5896, National Bureau of Economic Research, Inc.
  10. Wenders, John T, 1987. "On Perfect Rent Dissipation," American Economic Review, American Economic Association, vol. 77(3), pages 456-59, June.
  11. James Brander & M. Scott Taylor, 1997. "International Trade Between Consumer and Conservationist Countries," NBER Working Papers 6006, National Bureau of Economic Research, Inc.
  12. Cohen, Jon S. & Weitzman, Martin L., 1975. "A Marxian model of enclosures," Journal of Development Economics, Elsevier, vol. 1(4), pages 287-336, November.
  13. Hotte, Louis & Long, Ngo Van & Tian, Huilan, 2000. "International trade with endogenous enforcement of property rights," Journal of Development Economics, Elsevier, vol. 62(1), pages 25-54, June.
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