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Environmental Policy, Intra-Industry Trade and Transfrontier Pollution

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  • Nicole Gürtzgen
  • Michael Rauscher

Abstract

The paper discusses effects of domestic environmental policy on foreignemissions and on transboundary pollution. We use a Dixit-Stiglitz typemodel of monopolistic competition with an endogenous number of firms.Production generates environmental externalities which spill over to theother country. It is shown that environmental policy has an impact onmarket structure at home and abroad. These market structure effectsinduce changes in emissions abroad. In contrast to what has been derivedin earlier contributions, it turns out to be possible that tighterenvironmental standards at home lead to less emissions abroad. The paperderives these results and provides the economic intuition behind them.Finally, conditions for optimal environmental policies are derived. Copyright Kluwer Academic Publishers 2000

Suggested Citation

  • Nicole Gürtzgen & Michael Rauscher, 2000. "Environmental Policy, Intra-Industry Trade and Transfrontier Pollution," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 17(1), pages 59-71, September.
    • Handle: RePEc:kap:enreec:v:17:y:2000:i:1:p:59-71
    DOI: 10.1023/A:1008340519683
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    References listed on IDEAS

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    1. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    2. 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.
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    4. James R. MARKUSEN, 2021. "International Externalities And Optimal Tax Structures," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 16, pages 341-355, World Scientific Publishing Co. Pte. Ltd..
    5. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, January.
    6. Rauscher, Michael, 1997. "International Trade, Factor Movements, and the Environment," OUP Catalogue, Oxford University Press, number 9780198290506.
    7. Daniel Gros, 1987. "Protectionism in a Framework with Intra-Industry Trade: Tariffs, Quotas, Retaliation, and Welfare Losses (Le protectionnisme dans un cadre faisant intervenir les échanges de produits analogues: droit," IMF Staff Papers, Palgrave Macmillan, vol. 34(1), pages 86-114, March.
    8. Rauscher, Michael, 2005. "International Trade, Foreign Investment, and the Environment," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 3, chapter 27, pages 1403-1456, Elsevier.
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