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Renewable Resources, Pollution and Trade in a Small Open Economy

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  • Horatiu Rus

    (Department of Economics, University of Waterloo)

Abstract

Industrial pollution often exerts negative spillovers on resource-based productive sectors. International trade creates conditions for the overexploitation of an open-access renewable resource, but also provides opportunities for separating the productive sectors spatially. The existing literature suggests that a diversified exporter of the renewable resource good tends to lose from trade due to over-depletion, while the exporter of the non-resource good gains. This paper shows that, depending on the relative damage inflicted by the two industries on the environment, it is possible that the production externality will persist and that specialization in the manufacturing/dirty good may not be the optimal choice from a welfare perspective. In addition, the resource exporter does not necessarily have to lose from trade even when specializing incompletely, due to the partially offsetting external effects.

Suggested Citation

  • Horatiu Rus, 2010. "Renewable Resources, Pollution and Trade in a Small Open Economy," Working Papers 1006, University of Waterloo, Department of Economics, revised May 2010.
    • Handle: RePEc:wat:wpaper:1006
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    References listed on IDEAS

    as
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    Cited by:

    1. Soham Baksi & Michael Benarroch, 2015. "Production Externalities, Environmental Taxes, and the Gains from Trade," Departmental Working Papers 2015-05, The University of Winnipeg, Department of Economics.

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    More about this item

    JEL classification:

    • Q27 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Issues in International Trade
    • Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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