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Environmental Protection and Trade Liberalization in a Small Open Dual Economy

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  • Ichiroh Daitoh

Abstract

The author investigates the conditions under which environmental protection and trade liberalization might improve urban unemployment and welfare in a small open Harris–Todaro model with polluting urban manufacturing. While a tariff reduction decreases manufacturing employment, a rise in the pollution tax rate may increase it when a dirty input is complementary to capital. Environmental protection and trade liberalization are consistent in reducing the level of urban unemployment because they lower it under the same condition. They are consistent in increasing GDP if a rise in the pollution tax rate decreases manufacturing employment. Otherwise, trade liberalization will mitigate a decrease in GDP because of environmental protection if the degree of urbanization is low and if rural technology exhibits weak diminishing returns to labor. This GDP effect plays a central role in welfare improvement.

Suggested Citation

  • Ichiroh Daitoh, 2008. "Environmental Protection and Trade Liberalization in a Small Open Dual Economy," Review of Development Economics, Wiley Blackwell, vol. 12(4), pages 728-736, November.
    • Handle: RePEc:bla:rdevec:v:12:y:2008:i:4:p:728-736
    DOI: 10.1111/j.1467-9361.2008.00455.x
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    References listed on IDEAS

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    1. Beghin, John C. & Roland-Holst, David & Van der Mensbrugghe, Dominique, 2002. "Trade and the Environment in General Equilibrium: Evidence from Developing Economies," Staff General Research Papers Archive 4090, Iowa State University, Department of Economics.
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    Cited by:

    1. Kuo†Hsing Kuo & Cheng†Te Lee & Shang†Fen Wu, 2018. "Environmental Policy And Labour Market Imperfection," Bulletin of Economic Research, Wiley Blackwell, vol. 70(2), pages 175-184, April.
    2. Li, Xiaochun & Xu, Yuanting & Wang, Dianshuang, 2014. "Environment and labor movement of skilled labor and unskilled labor between sectors," Economic Modelling, Elsevier, vol. 38(C), pages 367-371.
    3. Sheng-Huei Ko & Kuo-Hsing Kuo & Cheng-Te Lee & Chen Fang, 2017. "Environmental Tax And Return Urban–Rural Migration," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 62(02), pages 447-458, June.
    4. Kuo‐Hsing Kuo & Shang‐Fen Wu & Cheng‐Te Lee, 2022. "The impact of environmental policy on wage inequality," International Journal of Economic Theory, The International Society for Economic Theory, vol. 18(4), pages 472-485, December.
    5. Daitoh, Ichiroh & Tarui, Nori, 2022. "Open access renewable resources, urban unemployment, and the resolution of dual institutional failures," Environment and Development Economics, Cambridge University Press, vol. 27(4), pages 316-332, August.
    6. Ichiroh Daitoh & Nori Tarui, 2016. "Open-access Renewable Resources and Urban Unemployment: Dual Institutional Failures in a Small Open Economy," Keio-IES Discussion Paper Series 2016-009, Institute for Economics Studies, Keio University.
    7. Dianshuang Wang, 2019. "Manufacturing and agricultural pollution, private mitigation and wage inequality in the presence of pollution externalities," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 65(2), pages 51-58.
    8. Yunyun Wu & Xiaochun Li, 2021. "International factor mobility and environment in a dual agricultural economy," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 66(1), pages 75-89, February.
    9. Yunyun Wu & Xiaochun Li, 2024. "Industrial technological progress, technology spillover, and the environment in a dual agricultural economy," International Journal of Economic Theory, The International Society for Economic Theory, vol. 20(2), pages 243-266, June.
    10. Makoto Tawada & Shuqin Sun, 2010. "Urban Pollution, Unemployment and National Welfare in a Dualistic Economy," Review of Development Economics, Wiley Blackwell, vol. 14(2), pages 311-322, May.

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