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Common ground between free-traders and environmentalists

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  • Karp, Larry
  • Sacheti, Sandeep
  • Zhao, Jinhua

Abstract

We use a North-South model with property right differences and resource dynamics to study the effects of trade on resource use and welfare. Autarky is likely to Pareto-dominate free trade in the long run when the environment is quite fragile, and the result is reversed when the environment is quite resilient. Trade may cause an environmentally poor country to "drag down" its richer trading partner, when they degrade their stocks which would be preserved under autarky. It may enable the environmentally richer country to "pull up" its partner, when they preserve their stocks which would be degraded under autarky.
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Suggested Citation

  • Karp, Larry & Sacheti, Sandeep & Zhao, Jinhua, 1999. "Common ground between free-traders and environmentalists," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt7jw3t8pw, Department of Agricultural & Resource Economics, UC Berkeley.
    • Handle: RePEc:cdl:agrebk:qt7jw3t8pw
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    References listed on IDEAS

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    1. James A. Brander & M. Scott Taylor, 1997. "International Trade and Open-Access Renewable Resources: The Small Open Economy Case," Canadian Journal of Economics, Canadian Economics Association, vol. 30(3), pages 526-552, August.
    2. Anderson, Kym, 1993. "Economic Growth, Environmental Issues and Trade," CEPR Discussion Papers 830, C.E.P.R. Discussion Papers.
    3. David M. G. Newbery & Joseph E. Stiglitz, 1984. "Pareto Inferior Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(1), pages 1-12.
    4. Chichilnisky, Graciela, 1993. "North-South trade and the dynamics of renewable resources," Structural Change and Economic Dynamics, Elsevier, vol. 4(2), pages 219-248, December.
    5. Low, P., 1992. "International Trade and the Environment," World Bank - Discussion Papers 159, World Bank.
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    Cited by:

    1. Eggert, HÃ¥kan & Greaker, Mads, 2009. "Effects of Global Fisheries on Developing Countries: Possibilities for Income and Threat of Depletion," RFF Working Paper Series dp-10-09-02-efd, Resources for the Future.
    2. Karp, Larry, 2005. "Property rights, mobile capital, and comparative advantage," Journal of Development Economics, Elsevier, vol. 77(2), pages 367-387, August.
    3. Michele Ruta & Anthony J. Venables, 2012. "International Trade in Natural Resources: Practice and Policy," Annual Review of Resource Economics, Annual Reviews, vol. 4(1), pages 331-352, August.
    4. Akihiko Yanase, 2010. "Trade, Strategic Environmental Policy, and Global Pollution," Review of International Economics, Wiley Blackwell, vol. 18(3), pages 493-512, August.
    5. Richter, Andries & van Soest, Daan & Grasman, Johan, 2013. "Contagious cooperation, temptation, and ecosystem collapse," Journal of Environmental Economics and Management, Elsevier, vol. 66(1), pages 141-158.
    6. Gallegos, Alberto & Régibeau, Pierre, 2004. "Managed Trade, Trade liberalisation and Local Pollution," Economics Discussion Papers 8877, University of Essex, Department of Economics.
    7. Karp, Larry & Zhao, Jinhua & Sacheti, Sandeep, 2003. "The long-run effects of environmental reform in open economies," Journal of Environmental Economics and Management, Elsevier, vol. 45(2), pages 246-264, March.
    8. Erwin Bulte & Edward Barbier, 2005. "Trade and Renewable Resources in a Second Best World: An Overview," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 30(4), pages 423-463, April.
    9. Anriquez, Gustavo, 2002. "Trade And The Environment: An Economic Literature Survey," Working Papers 28598, University of Maryland, Department of Agricultural and Resource Economics.
    10. Zaman, Rubaiya, 2012. "CO2 Emissions, Trade Openness and GDP Percapita : Bangladesh Perspective," MPRA Paper 48515, University Library of Munich, Germany.
    11. Bård Harstad, 2022. "Trade, Trees, and Contingent Trade Agreements," CESifo Working Paper Series 9596, CESifo.
    12. Bård Harstad, 2020. "Trade and Trees: How Trade Agreements Can Motivate Conservation Instead of Depletion," CESifo Working Paper Series 8569, CESifo.
    13. Akihiho Yanase, 2013. "Free trade may save a renewable resource from exhaustion," Economics Bulletin, AccessEcon, vol. 33(1), pages 226-233.
    14. Toma, Pierluigi & Frittelli, Massimo & Apergis, Nicholas, 2023. "The economic sustainability of optimizing feedstock imports with environmental constraints," Socio-Economic Planning Sciences, Elsevier, vol. 87(PB).
    15. Harvey E. Lapan & Shiva Sikdar, 2017. "Can Trade Be Good for the Environment?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(2), pages 267-288, April.
    16. Larry Karp & Armon Rezai, 2022. "Trade and Resource Sustainability with Asset Markets," Dynamic Games and Applications, Springer, vol. 12(3), pages 929-953, September.
    17. Dube, Isha & Quaas, Martin, 2024. "Love of variety and the welfare effects of trade in renewable resources," Journal of Environmental Economics and Management, Elsevier, vol. 125(C).
    18. Barbier, Edward B. & Bulte, Erwin H., 2004. "Introduction to the symposium on trade, renewable resources and biodiversity," Journal of Environmental Economics and Management, Elsevier, vol. 48(2), pages 883-890, September.
    19. González-Val, Rafael & Pueyo, Fernando, 2019. "Natural resources, economic growth and geography," Economic Modelling, Elsevier, vol. 83(C), pages 150-159.
    20. Gulati, Sumeet, 2001. "The Effects of Choosing Free Trade on Endogenous Environmental Regulation and Welfare: A Model of Common Agency Government," 2001 Annual meeting, August 5-8, Chicago, IL 20449, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    21. Horatiu A. Rus, 2016. "Renewable Resources, Pollution and Trade," Review of International Economics, Wiley Blackwell, vol. 24(2), pages 364-391, May.
    22. Hamaguchi, Yoshihiro, 2023. "Environmental tax evasion as a determinant of the Porter and pollution haven hypotheses in a corrupt political system," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 610-633.
    23. Cremer, Helmuth & Gahvari, Firouz, 2006. "Which border taxes? Origin and destination regimes with fiscal competition in output and emission taxes," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 2121-2142, November.
    24. Gang Li & Akihiko Yanase, 2022. "Trade, Resource Use and Pollution: A Synthesis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 83(3), pages 861-901, November.
    25. Mr. Muthukumara Mani & Mr. Per G. Fredriksson, 2002. "The Rule of Law and the Pattern of Environment Protection," IMF Working Papers 2002/049, International Monetary Fund.

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    More about this item

    Keywords

    trade; free-trade; environment;
    All these keywords.

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • F1 - International Economics - - Trade
    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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