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Environmental Control, Wage Inequality and National Welfare for a Tourism Economy

Listed author(s):
  • Chi-Chur Chao

    ()

    (Deakin University,Melbourne)

  • Pasquale M. Sgro

    ()

    (Deakin University,Melbourne)

This paper examines the effects of environmental control on income distribution and welfare for an open economy with inbound tourism. The pollution input is considered as a mobile factor between sectors, and a rise in it raises the wages of skilled labor in the traded sector but can weaken the wages of unskilled labor in the non-traded sector. Thus, lax policy on environmental controls can be a source of rising wage inequality between skilled and unskilled labor.In addition, loosened environmental control lowers the price of the non-traded good and thus reduces the revenue from tourism exports. Stricter controls on pollution emissions can therefore narrow the wage gap and promote residents’ welfare. Nonetheless, to improve the production efficiency of the non-traded good sector, permit prices of emissions may need to be lower under imperfect competition.

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Paper provided by Sapienza University of Rome, CIDEI in its series Working Papers with number 78.

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Length: 17
Date of creation: Sep 2008
Handle: RePEc:rsp:wpaper:wp78
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  1. Jean-Jacques Nowak & Mondher Sahli & Pasquale M. Sgro, 2003. "Tourism, Trade And Domestic Welfare," Pacific Economic Review, Wiley Blackwell, vol. 8(3), pages 245-258, October.
  2. Stephen Tokarick, 2005. "Quantifying the Impact of Trade on Wages: the Role of Nontraded Goods," Review of International Economics, Wiley Blackwell, vol. 13(5), pages 841-860, November.
  3. Davis, Donald R., 1998. "Technology, unemployment, and relative wages in a global economy," European Economic Review, Elsevier, vol. 42(9), pages 1613-1633, November.
  4. Xu, Bin, 2003. "Trade liberalization, wage inequality, and endogenously determined nontraded goods," Journal of International Economics, Elsevier, vol. 60(2), pages 417-431, August.
  5. Pasquale M. Sgro & Chi-Chur Chao & Bharat R. Hazari & Jean-Pierre Laffargue & Eden S. H. Yu, 2005. "Tourism, Jobs, Capital Accumulation and the Economy: A Dynamic Analysis," Working Papers 2005.136, Fondazione Eni Enrico Mattei.
  6. Jota Ishikawa & Kazuharu Kiyono, 2006. "Greenhouse-Gas Emission Controls In An Open Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(2), pages 431-450, May.
  7. Adrian Wood, 1995. "How Trade Hurt Unskilled Workers," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 57-80, Summer.
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