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International trade and the environment : theoretical and policy linkages

  • J. Peter Neary

I review and extend three approaches to trade and environmental policies: competitive general equilibrium, oligopoly and monopolistic competition. The first two have surprisingly similar implications; deviation deviations from first best rules are justified only by constraints on policy choice (which motivates what I call a "single dividend" approach to environmental policy), and taxes and emissions standards differ in ways which reflect the Le Chatelier principle. I also show how environmental taxes may lead to a catastrophic relocation of industry in the presence of agglomeration effects, although not necessarily if there is a continuum of industries which differ in pollution intensity. An earlier version was presented as an invited plenary lecture to the European Association for Environmental and Resource Economics Conference, Oslo, 1999.

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File URL: http://hdl.handle.net/10197/1261
File Function: First version, 2005
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Paper provided by School of Economics, University College Dublin in its series Working Papers with number 200018.

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Date of creation: Jun 2005
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Handle: RePEc:ucn:wpaper:200018
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  1. Copeland,B.R. & Scott Taylor,M., 2003. "Trade, growth and the environment," Working papers 10, Wisconsin Madison - Social Systems.
  2. J. P. Neary, 1997. "Pitfalls in the theory of international trade policy: concertina reforms of tariffs and subsidies to high technology industries," LSE Research Online Documents on Economics 20341, London School of Economics and Political Science, LSE Library.
  3. Neary, J.P. & Leahy, D., 1998. "Strategic Trade and Industrial Policy Towards Dynamic Oligopolies," Papers 98/14, College Dublin, Department of Political Economy-.
  4. Neary, J. P. & Roberts, K. W. S., 1980. "The theory of household behaviour under rationing," European Economic Review, Elsevier, vol. 13(1), pages 25-42, January.
  5. J. Peter Neary, 1989. "Trade liberalization and shadow prices in the presence of tariffs and quotas," Working Papers 198904, School of Economics, University College Dublin.
  6. Jonathan Eaton & Gene M. Grossman, 1983. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
  7. 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.
  8. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 857-880.
  9. Markusen James R. & Morey Edward R. & Olewiler Nancy D., 1993. "Environmental Policy when Market Structure and Plant Locations Are Endogenous," Journal of Environmental Economics and Management, Elsevier, vol. 24(1), pages 69-86, January.
  10. Tatsuo Hatta, 1977. "A Theory of Piecemeal Policy Recommendations," Review of Economic Studies, Oxford University Press, vol. 44(1), pages 1-21.
  11. Dermot Leahy & J. Peter Neary, 1999. "Learning by Doing, Precommitment and Infant-Industry Promotion," Review of Economic Studies, Oxford University Press, vol. 66(2), pages 447-474.
  12. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
  13. Rauscher, Michael, 1994. "On Ecological Dumping," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 822-40, Supplemen.
  14. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  15. Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series 430, Research Institute of Industrial Economics.
  16. 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.
  17. Karen Palmer & Wallace E. Oates & Paul R. Portney, 1995. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 119-132, Fall.
  18. Adam B. Jaffe et al., 1995. "Environmental Regulation and the Competitiveness of U.S. Manufacturing: What Does the Evidence Tell Us?," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 132-163, March.
  19. Brander, James A & Taylor, M Scott, 1998. "The Simple Economics of Easter Island: A Ricardo-Malthus Model of Renewable Resource Use," American Economic Review, American Economic Association, vol. 88(1), pages 119-38, March.
  20. Copeland Brian R., 1994. "International Trade and the Environment: Policy Reform in a Polluted Small Open Economy," Journal of Environmental Economics and Management, Elsevier, vol. 26(1), pages 44-65, January.
  21. J. Peter Neary & Albert G. Schweinberger, 1986. "Factor Content Functions and the Theory of International Trade," Review of Economic Studies, Oxford University Press, vol. 53(3), pages 421-432.
  22. Corden, W. Max & Falvey, Rodney E., 1985. "Quotas and the second best," Economics Letters, Elsevier, vol. 18(1), pages 67-70.
  23. J. Peter Neary, 1985. "International Factor Mobility, Minimum Wage Rates, and Factor-Price Equalization: A Synthesis," The Quarterly Journal of Economics, Oxford University Press, vol. 100(3), pages 551-570.
  24. Hoel, Michael, 1997. " Environmental Policy with Endogenous Plant Locations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(2), pages 241-59, June.
  25. Barbara J. Spencer & James A. Brander, 1983. "International R&D Rivalry and Industrial Strategy," NBER Working Papers 1192, National Bureau of Economic Research, Inc.
  26. Simpson, R. David & Bradford, Robert III, 1996. "Taxing Variable Cost: Environmental Regulation as Industrial Policy," Journal of Environmental Economics and Management, Elsevier, vol. 30(3), pages 282-300, May.
  27. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  28. Neary, James Peter, 1991. "Cost asymmetries in international subsidy games: Should governments help winners or losers?," Discussion Papers, Series II 147, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
  29. J. Peter Neary, 2000. "Of hype and hyperbolas : introducing the new economic geography," Working Papers 200019, School of Economics, University College Dublin.
  30. John Beghin & David Roland-Holst & Dominique van der Mensbrugghe, 1997. "Trade and Pollution Linkages: Piecemeal Reform and Optimal Intervention," Canadian Journal of Economics, Canadian Economics Association, vol. 30(2), pages 442-55, May.
  31. Brander, James A., 1995. "Strategic trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 27, pages 1395-1455 Elsevier.
  32. Motta, Massimo & Thisse, Jacques-Francois, 1994. "Does environmental dumping lead to delocation?," European Economic Review, Elsevier, vol. 38(3-4), pages 563-576, April.
  33. Rauscher, Michael, 1997. "International Trade, Factor Movements, and the Environment," OUP Catalogue, Oxford University Press, number 9780198290506, May.
  34. Kennedy Peter W., 1994. "Equilibrium Pollution Taxes in Open Economies with Imperfect Competition," Journal of Environmental Economics and Management, Elsevier, vol. 27(1), pages 49-63, July.
  35. Anderson, James E & Neary, J Peter, 1992. "Trade Reform with Quotas, Partial Rent Retention, and Tariffs," Econometrica, Econometric Society, vol. 60(1), pages 57-76, January.
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