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Environmental policy, comparative advantage, and welfare for a developing economy

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  • BELADI, HAMID
  • CHAO, CHI-CHUR

Abstract

This paper investigates the effects of pollution taxation for a dual developing economy with a separate abatement sector. Due to the real rigidity of the urban wage, pollution taxes raise the cost of the urban good and hence its relative price. This suggests that because of flexible rural wages, the developing economy tends to have a comparative advantage in the rural good which may be less polluting. Moreover, the higher price of the urban good worsens the urban unemployment ratio. The optimal tax on pollution is thus lower than the marginal environmental damage to the economy.

Suggested Citation

  • Beladi, Hamid & Chao, Chi-Chur, 2006. "Environmental policy, comparative advantage, and welfare for a developing economy," Environment and Development Economics, Cambridge University Press, vol. 11(5), pages 559-568, October.
    • Handle: RePEc:cup:endeec:v:11:y:2006:i:05:p:559-568_00
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    Cited by:

    1. repec:ove:journl:aid:9298 is not listed on IDEAS
    2. 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.
    3. 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.
    4. Jiancai Pi & Yu Zhou, 2015. "The impacts of corruption on wage inequality and rural–urban migration in developing countries," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 54(3), pages 753-768, May.
    5. Hao, Yu & Zhang, Zong-Yong & Yang, Chuxiao & Wu, Haitao, 2021. "Does structural labor change affect CO2 emissions? Theoretical and empirical evidence from China," Technological Forecasting and Social Change, Elsevier, vol. 171(C).
    6. 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.
    7. 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.
    8. Xiaochun Li & Huanan Fu, 2023. "Agricultural producer service subsidies and agricultural pollution: An approach based on endogenous agricultural pollution," Review of Development Economics, Wiley Blackwell, vol. 27(2), pages 1177-1198, May.
    9. 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.

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