IDEAS home Printed from https://ideas.repec.org/h/spr/conchp/978-981-97-5652-0_12.html
   My bibliography  Save this book chapter

Controlling Environmental Pollution, Sectoral Composition and Factor Prices: A H–O and SFM Hybrid Approach

In: International Trade, Resource Mobility and Adjustments in a Changing World

Author

Listed:
  • Biswajit Mandal

    (Visva-Bharati University)

  • Arya Roy Bardhan

    (Observer Research Foundation)

  • Saswati Chaudhuri

    (St. Xavier’s College (Autonomous))

Abstract

The consternation regarding environment is manifold. One of them is environmental quality which has both short-run and long-run implications including sustainable development goals. In view of such apprehension, this paper develops a Heckscher–Ohlin nugget kind of competitive general equilibrium model with four sectors and four factors of production to analyse the effect of tax policy to curb environmental pollution. Surprisingly we find that environmental tax on the polluting sector eventually raises the production of polluting output and widens the wage inequality between skilled and unskilled labour. On the other hand, taxing the non-polluting sector yields the desired outcome in both production and factor income. The possibility of vanishing sector strengthens the counterintuitive results we get in case of taxing the non-polluting sector. Such an intriguing outcome is driven by the recursive nature of structure of the H–O nugget model. We empirically test the efficacy of environmental taxes using a system-GMM dynamic panel data on 10 OECD countries for 1997–2020 and find that environmental taxes have a deleterious effect on the environmental quality.

Suggested Citation

  • Biswajit Mandal & Arya Roy Bardhan & Saswati Chaudhuri, 2024. "Controlling Environmental Pollution, Sectoral Composition and Factor Prices: A H–O and SFM Hybrid Approach," Contributions to Economics, in: Sugata Marjit & Biswajit Mandal (ed.), International Trade, Resource Mobility and Adjustments in a Changing World, chapter 0, pages 259-291, Springer.
    • Handle: RePEc:spr:conchp:978-981-97-5652-0_12
    DOI: 10.1007/978-981-97-5652-0_12
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Brian R. Copeland & M. Scott Taylor, 2004. "Trade, Growth, and the Environment," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 7-71, March.
    2. Mandal, Biswajit & Marjit, Sugata, 2010. "Corruption and wage inequality?," International Review of Economics & Finance, Elsevier, vol. 19(1), pages 166-172, January.
    3. Arik Levinson & M. Scott Taylor, 2008. "Unmasking The Pollution Haven Effect," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 223-254, February.
    4. Brian R. Copeland & M. Scott Taylor, 1994. "North-South Trade and the Environment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(3), pages 755-787.
    5. Copeland, Brian R., 2000. "Trade and environment: policy linkages," Environment and Development Economics, Cambridge University Press, vol. 5(4), pages 405-432, October.
    6. Jones, Ronald W., 1996. "International trade, real wages, and technical progress: The specific-factors model," International Review of Economics & Finance, Elsevier, vol. 5(2), pages 113-124.
    7. Daniel C. Esty, 2001. "Bridging the Trade-Environment Divide," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 113-130, Summer.
    8. Don Fullerton & Garth Heutel, 2010. "The General Equilibrium Incidence of Environmental Mandates," American Economic Journal: Economic Policy, American Economic Association, vol. 2(3), pages 64-89, August.
    9. Brian R. Copeland & M. Scott Taylor, 1997. "A Simple Model of Trade, Capital Mobility, and the Environment," NBER Working Papers 5898, National Bureau of Economic Research, Inc.
    10. Selden Thomas M. & Song Daqing, 1994. "Environmental Quality and Development: Is There a Kuznets Curve for Air Pollution Emissions?," Journal of Environmental Economics and Management, Elsevier, vol. 27(2), pages 147-162, September.
    11. Ronald W. Jones, 2018. "The Structure of Simple General Equilibrium Models," World Scientific Book Chapters, in: International Trade Theory and Competitive Models Features, Values, and Criticisms, chapter 4, pages 61-84, World Scientific Publishing Co. Pte. Ltd..
    12. Mandal, Biswajit & Chaudhuri, Saswati & Prasad, Alaka Shree, 2020. "Unemployment of Unskilled Labor due to COVID-19 led Restriction on Migration and Trade," GLO Discussion Paper Series 614, Global Labor Organization (GLO).
    13. Jones, R.W. & Marjit, S., 1992. "International Trade and Endogenous Production Structures," RCER Working Papers 312, University of Rochester - Center for Economic Research (RCER).
    14. Gene M. Grossman & Alan B. Krueger, 1995. "Economic Growth and the Environment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(2), pages 353-377.
    15. Marjit, Sugata, 1990. "A simple production model in trade and its applications," Economics Letters, Elsevier, vol. 32(3), pages 257-260, March.
    16. Fullerton, Don & Heutel, Garth, 2007. "The general equilibrium incidence of environmental taxes," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 571-591, April.
    17. Carraro, Carlo & Galeotti, Marzio & Gallo, Massimo, 1996. "Environmental taxation and unemployment: Some evidence on the 'double dividend hypothesis' in Europe," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 141-181, October.
    18. Sugata Marjit & Saibal Kar, 2009. "Emigration, Wage Inequality and Vanishing Sectors," Discussion Papers 09/20, University of Nottingham, GEP.
    19. Jones, Ronald W & Engerman, Stanley L, 1996. "Trade, Technology, and Wages: A Tale of Two Countries," American Economic Review, American Economic Association, vol. 86(2), pages 35-40, May.
    20. Ballard, Charles L. & Fullerton, Don & Shoven, John B. & Whalley, John, 2009. "A General Equilibrium Model for Tax Policy Evaluation," National Bureau of Economic Research Books, University of Chicago Press, number 9780226036335, July.
    21. Ronald W. Jones, 2012. "General equilibrium theory and competitive trade models," International Journal of Economic Theory, The International Society for Economic Theory, vol. 8(2), pages 149-164, June.
    22. Biswajit Mandal, 2022. "Lower Corruption Warrants Less, but Higher Corruption Removes it: A Ricardian Note," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 20(2), pages 479-486, June.
    23. Mandal Biswajit & Chaudhuri Saswati & Prasad Alaka Shree, 2020. "A Note on Unemployment of Unskilled Labor due to COVID-19 led Restriction on Migration and Trade," Review of Economics, De Gruyter, vol. 71(3), pages 223-236, December.
    24. Shafik, Nemat & Bandyopadhyay, Sushenjit, 1992. "Economic growth and environmental quality : time series and cross-country evidence," Policy Research Working Paper Series 904, The World Bank.
    25. Creedy, John, 1997. "Taxation in General Equilibrium: An Introduction," Bulletin of Economic Research, Wiley Blackwell, vol. 49(3), pages 177-203, July.
    26. Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-1051, September.
    27. Don Fullerton & Gilbert E. Metcalf, 1997. "Environmental Taxes and the Double Dividends Hypothesis: Did You Really Expect Something for Nothing?," Discussion Papers Series, Department of Economics, Tufts University 9706, Department of Economics, Tufts University.
    28. Biswajit Mandal & Sugata Marjit, 2012. "Capital inflow, vanishing sector and wage distribution in an economy with corruption related intermediation," Economics Bulletin, AccessEcon, vol. 32(3), pages 2128-2135.
    Full references (including those not matched with items on IDEAS)

    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. Brian R. Copeland & M. Scott Taylor, 2004. "Trade, Growth, and the Environment," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 7-71, March.
    2. Jeffrey A. Frankel & Andrew K. Rose, 2005. "Is Trade Good or Bad for the Environment? Sorting Out the Causality," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 85-91, February.
    3. Muhammad Shahbaz & Syed Jawad Hussain Shahzad & Mantu Kumar Mahalik & Perry Sadorsky, 2018. "How strong is the causal relationship between globalization and energy consumption in developed economies? A country-specific time-series and panel analysis," Applied Economics, Taylor & Francis Journals, vol. 50(13), pages 1479-1494, March.
    4. Frankel, Jeffrey, 2008. "Global Environmental Policy and Global Trade Policy," Working Paper Series rwp08-058, Harvard University, John F. Kennedy School of Government.
    5. Brock, William A. & Taylor, M. Scott, 2005. "Economic Growth and the Environment: A Review of Theory and Empirics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 28, pages 1749-1821, Elsevier.
    6. Thomas Jobert & Fatih Karanfil & Anna Tykhonenko, 2012. "Trade and Environment: Further Empirical Evidence from Heterogeneous Panels Using Aggregate Data," GREDEG Working Papers 2012-15, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    7. Fæhn, Taran & Bruvoll, Annegrete, 2009. "Richer and cleaner--At others' expense?," Resource and Energy Economics, Elsevier, vol. 31(2), pages 103-122, May.
    8. Frankel, Jeffrey A., 2009. "Environmental Effects of International Trade," Scholarly Articles 4481652, Harvard Kennedy School of Government.
    9. Jevan M. Cherniwchan & M. Scott Taylor, 2022. "International Trade and the Environment: Three Remaining Empirical Challenges," NBER Working Papers 30020, National Bureau of Economic Research, Inc.
    10. Mehdi Abbas, 2013. "Libre-échange et changements climatiques : " soutien mutuel " ou divergence ?," Post-Print halshs-00844818, HAL.
    11. Copeland, Brian R. & Taylor, M. Scott, 2005. "Free trade and global warming: a trade theory view of the Kyoto protocol," Journal of Environmental Economics and Management, Elsevier, vol. 49(2), pages 205-234, March.
    12. Chang, Chun-Ping & Wen, Jun & Dong, Minyi & Hao, Yu, 2018. "Does government ideology affect environmental pollutions? New evidence from instrumental variable quantile regression estimations," Energy Policy, Elsevier, vol. 113(C), pages 386-400.
    13. Xiao Chen & Alan Woodland, 2013. "International trade and climate change," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(3), pages 381-413, June.
    14. Jeffrey A. Frankel, 2003. "The Environment and Globalization," NBER Working Papers 10090, National Bureau of Economic Research, Inc.
    15. He, Jie & Wang, Hua, 2012. "Economic structure, development policy and environmental quality: An empirical analysis of environmental Kuznets curves with Chinese municipal data," Ecological Economics, Elsevier, vol. 76(C), pages 49-59.
    16. Managi, Shunsuke, 2006. "Are there increasing returns to pollution abatement? Empirical analytics of the Environmental Kuznets Curve in pesticides," Ecological Economics, Elsevier, vol. 58(3), pages 617-636, June.
    17. Sebri, Maamar, 2009. "La Zone Méditerranéenne Face à la Pollution de L’air : Une Investigation Econométrique [The Mediterranean Zone in front of Air pollution: an Econometric Investigation]," MPRA Paper 32382, University Library of Munich, Germany.
    18. Rothman, Dale S., 1998. "Environmental Kuznets curves--real progress or passing the buck?: A case for consumption-based approaches," Ecological Economics, Elsevier, vol. 25(2), pages 177-194, May.
    19. Raghbendra Jha & John Whalley, 2001. "The Environmental Regime in Developing Countries," NBER Chapters, in: Behavioral and Distributional Effects of Environmental Policy, pages 217-250, National Bureau of Economic Research, Inc.
    20. Alvarez-Herranz, Agustin & Balsalobre-Lorente, Daniel & Shahbaz, Muhammad & Cantos, José María, 2017. "Energy innovation and renewable energy consumption in the correction of air pollution levels," Energy Policy, Elsevier, vol. 105(C), pages 386-397.

    More about this item

    Keywords

    General equilibrium; Environmental tax; H–O nugget; Wage inequality;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F6 - International Economics - - Economic Impacts of Globalization

    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:spr:conchp:978-981-97-5652-0_12. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.