IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpot/0510012.html
   My bibliography  Save this paper

Pollution And Welfare In The Presence Of Informal Sector: Is There Any Trade-Off?

Author

Listed:
  • Sarbajit Chaudhuri

    (Dept. of Economics, Calcutta University, India)

Abstract

We present a three-sector general equilibrium model with an informal sector, which produces an intermediary for the formal sector, and analyze the effects of different policies on the environmental standard and welfare of the economy. Since the informal manufacturing sector creates pollution, higher the use of informal sector product, higher is the pollution created and higher the discrepancy between actual and permissible levels of pollution, so that the emission tax payable by the formal sector is also higher. The efficiency of a representative worker is inversely related to the level of pollution. In this setup, we show that even if the permissible level of pollution is reduced, the polluting sector may expand and worsen the environmental standard. However, this policy may be welfare improving. On the other hand, an inflow of foreign capital may reduce the pollution level but affect welfare adversely. The paper finds that there might exist a trade-off between the economy’s twin objectives of lowering the level of pollution and improving national welfare. These results are new in the trade and environment literature.

Suggested Citation

  • Sarbajit Chaudhuri, 2005. "Pollution And Welfare In The Presence Of Informal Sector: Is There Any Trade-Off?," Others 0510012, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpot:0510012
    Note: Type of Document - pdf; pages: 25
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/othr/papers/0510/0510012.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Khan, M. Ali, 1982. "Tariffs, foreign capital and immiserizing growth with urban unemployment and specific factors of production," Journal of Development Economics, Elsevier, vol. 10(2), pages 245-256, April.
    2. Koizumi, Tetsunori & Kopecky, Kenneth J., 1977. "Economic growth, capital movements and the international transfer of technical knowledge," Journal of International Economics, Elsevier, vol. 7(1), pages 45-65, February.
    3. Beladi, Hamid & Marjit, Sugata, 1992. "Foreign capital, unemployment and national welfare," Japan and the World Economy, Elsevier, vol. 4(4), pages 311-317, December.
    4. Blackman, Allen & Bannister, Geoffrey, 1997. "Community Pressure and Clean Technologies in the Informal Sector: An Econometric Analysis of the Adoption of Propane by Traditional Brickmakers in Ciudad Juarez, Mexico," RFF Working Paper Series dp-97-16-rev, Resources for the Future.
    5. Marjit, Sugata, 2003. "Economic reform and informal wage--a general equilibrium analysis," Journal of Development Economics, Elsevier, vol. 72(1), pages 371-378, October.
    6. Brecher, Richard A. & Diaz Alejandro, Carlos F., 1977. "Tariffs, foreign capital and immiserizing growth," Journal of International Economics, Elsevier, vol. 7(4), pages 317-322, November.
    7. Manash Gupta, 1994. "Duty-free zone, unemployment, and welfare a note," Journal of Economics, Springer, vol. 59(2), pages 217-236, June.
    8. repec:bla:econom:v:58:y:1991:i:229:p:107-21 is not listed on IDEAS
    9. Hamid Beladi & Sugata Marjit, 1992. "Foreign Capital and Protectionism," Canadian Journal of Economics, Canadian Economics Association, vol. 25(1), pages 233-238, February.
    10. Ronald Findlay, 1978. "Relative Backwardness, Direct Foreign Investment, and the Transfer of Technology: A Simple Dynamic Model," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 92(1), pages 1-16.
    11. Sarbajit Chaudhuri, 2003. "How and how far to liberalize a developing economy with informal sector and factor market distortions," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 12(4), pages 403-428.
    12. repec:bla:econom:v:60:y:1993:i:237:p:79-103 is not listed on IDEAS
    13. Cole, William E & Sanders, Richard D, 1985. "Internal Migration and Urban Employment in the Third World," American Economic Review, American Economic Association, vol. 75(3), pages 481-494, June.
    14. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
    15. repec:bla:econom:v:64:y:1997:i:254:p:353-63 is not listed on IDEAS
    16. Manash Gupta, 1998. "Foreign capital and technology transfer in a dynamic model," Journal of Economics, Springer, vol. 67(1), pages 75-92, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ummad Mazhar & Ceyhun Elgin, 2013. "Environmental Regulation, Pollution and the Informal Economy," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 9, pages 62-81.
    2. Elgin, Ceyhun & Oztunali, Oguz, 2014. "Pollution and informal economy," Economic Systems, Elsevier, vol. 38(3), pages 333-349.
    3. Chaudhuri, Sarbajit & Gupta, Manash Ranjan, 2013. "Endogenous Capital Market Imperfection, Informal Interest Rate Determination and International Factor mobility in a General Equilibrium Model," MPRA Paper 51157, University Library of Munich, Germany.
    4. Nilendu Chatterjee & Kausik Gupta & Tonmoy Chatterjee, 2017. "Revisiting the Conflicts between ‘Environmental Taxes vs Standard' in the Context of International Trade: The Role of Waste Recycling," International Journal of Sustainable Economies Management (IJSEM), IGI Global, vol. 6(2), pages 13-29, April.
    5. Ceyhun Elgin & Oğuz Öztunalı, 2014. "Environmental Kuznets Curve for the Informal Sector of Turkey (1950-2009)," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(4), pages 471-485.
    6. Chaudhuri, Sarbajit & Gupta, Manash Ranjan, 2014. "International factor mobility, informal interest rate and capital market imperfection: A general equilibrium analysis," Economic Modelling, Elsevier, vol. 37(C), pages 184-192.
    7. Ceyhun Elgin & Oğuz Öztunalı, 2014. "Environmental Kuznets Curve for the Informal Sector of Turkey (1950-2009)," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(4), pages 471-485, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chaudhuri, Sarbajit & Mukhopadhyay, Ujjaini, 2009. "Revisiting the Informal Sector: A General Equilibrium Approach," MPRA Paper 52135, University Library of Munich, Germany.
    2. Mukherjee, Soumyatanu, 2012. "Revisiting the Apparent Paradox: Foreign Capital Inflow, Welfare Amelioration and ‘Jobless Growth’ with Agricultural Dualism and Non-traded Intermediate Input," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 27, pages 123-133.
    3. Sarbajit Chaudhuri & Arnab Ghosh & Sattiki Deb, 2018. "Foreign Direct Investment and Rural Farm and Nonfarm Sectors in a Developing Economy," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 16(3), pages 787-810, September.
    4. Sarbajit Chaudhuri, 2005. "Labour Market Distortion, Technology Transfer And Gainful Effects Of Foreign Capital," Manchester School, University of Manchester, vol. 73(2), pages 214-227, March.
    5. Chaudhuri, Sarbajit, 2007. "Foreign capital, welfare and urban unemployment in the presence of agricultural dualism," Japan and the World Economy, Elsevier, vol. 19(2), pages 149-165, March.
    6. Chaudhuri, Sarbajit, 2014. "How can trade unionism affect welfare consequences of trade and investment reforms in a developing economy?," MPRA Paper 59063, University Library of Munich, Germany.
    7. Chaudhuri, Sarbajit & Mukherjee, Ujjaini, 2002. "Removal of protectionism, foreign investment and welfare in a model of informal sector," Japan and the World Economy, Elsevier, vol. 14(1), pages 101-116, January.
    8. M. Ali Khan, 2007. "The Harris-Todaro Hypothesis," PIDE-Working Papers 2007:16, Pakistan Institute of Development Economics.
    9. Somasree Poddar & Sarbajit Chaudhuri, 2016. "Economic Reforms and Gender-Based Wage Inequality in the Presence of Factor Market Distortions," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 14(2), pages 301-321, December.
    10. Chaudhuri, Sarbajit, 2014. "Foreign capital, non-traded goods and welfare in a developing economy in the presence of externalities," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 249-262.
    11. Chaudhuri, Sarbajit & Biswas, Anindya, 2016. "Endogenous labour market imperfection, foreign direct investment and external terms-of-trade shocks in a developing economy," Economic Modelling, Elsevier, vol. 59(C), pages 416-424.
    12. Mukherjee, Soumyatanu & Zafar, Sameen, 2014. "Technological progress with segmented factor markets and welfare implications for the urban poor," MPRA Paper 55297, University Library of Munich, Germany.
    13. Sarbajit Chaudhuri, 2016. "Trade Unionism and Welfare Consequences of Trade and Investment Reforms in A Developing Economy," Metroeconomica, Wiley Blackwell, vol. 67(1), pages 152-171, February.
    14. Chaudhuri, Sarbajit & Banerjee, Dibyendu, 2010. "FDI in agricultural land, welfare and unemployment in a developing economy," Research in Economics, Elsevier, vol. 64(4), pages 229-239, December.
    15. Ghosh, Sujata & Mandal, Biswajit & Gupta, Kausik, 2017. "Economic Liberalization and urban unemployment in the presence of informal sector," MPRA Paper 87463, University Library of Munich, Germany.
    16. Mukherjee, Soumyatanu, 2016. "Technology, trade and ‘urban poor’ in a general equilibrium model with segmented domestic factor markets," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 400-416.
    17. Beladi, Hamid & Yabuuchi, Shigemi, 2001. "Tariff-induced capital inflow and welfare in the presence of unemployment and informal sector," Japan and the World Economy, Elsevier, vol. 13(1), pages 51-60, January.
    18. Chatterjee, Tonmoy & Gupta, Kausik, 2014. "Trade Policies, Health Care and Social Welfare: A General Equilibrium Analysis," MPRA Paper 57315, University Library of Munich, Germany.
    19. Sarbajit Chaudhuri, 2001. "Foreign Capital Inflow, Non-traded Intermediary, Urban Unemployment, and Welfare in a Small Open Economy: A Theoretical Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(3), pages 225-235.
    20. Chaudhuri, Sarbajit & Mukhopadhyay, Ujjaini, 2013. "Foreign direct investment, environmentally sound technology and informal sector," Economic Modelling, Elsevier, vol. 31(C), pages 206-213.

    More about this item

    Keywords

    Pollution; informal sector; pollution emission tax; permissible level of pollution; foreign capital;
    All these keywords.

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O22 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Project Analysis
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpot:0510012. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: EconWPA (email available below). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.