IDEAS home Printed from https://ideas.repec.org/p/unp/wpaper/200502.html
   My bibliography  Save this paper

Who Pay for the Cleaner Air? Distributional Impact of Environmental Policy in a Dualistic Economy

Author

Listed:
  • Arief Anshory Yusuf

    (Department of Economics, Padjadjaran University)

Abstract

Using a technology where pollution is regarded as by-product of industry's activity and applied in a simple setup of Heckscher-Ohlin-Copeland-Taylor model, this paper analyses the possible distributional impacts of stricter environmental policy in a developing country characterized by the presence of labor-intensive informal sector which may not be a subject to the environmental regulation, and capital intensive formal sector which may face minimum wage policy. The comparative static analysis illustrates that stricter environmental regulation if enforced uniformly accross industries in undistorted labor market, hurts both labor and capital owner, leaving income ditribution unchanged. On the contrary, when economy is dualistic, income distribution may change due to labor reallocation. When the stricter regulation can only be enforced in formal sector, capital owner will be worse-off while labor are better-off. If initially capital reward is higher, the environmental policy will improve income distribution in favor of labor. The change in income distribution is greater when economy is dualistic.

Suggested Citation

  • Arief Anshory Yusuf, 2005. "Who Pay for the Cleaner Air? Distributional Impact of Environmental Policy in a Dualistic Economy," Working Papers in Economics and Development Studies (WoPEDS) 200502, Department of Economics, Padjadjaran University, revised Feb 2005.
    • Handle: RePEc:unp:wpaper:200502
    as

    Download full text from publisher

    File URL: http://lp3e.fe.unpad.ac.id/wopeds/200502.pdf
    File Function: First version, 2005
    Download Restriction: no
    ---><---

    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. Harry G. Johnson, 1969. "Minimum Wage Laws: A General Equilibrium Analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 2(4), pages 599-604, November.
    3. repec:bla:rdevec:v:1:y:1997:i:3:p:324-36 is not listed on IDEAS
    4. M. Hasan Imam & John Whalley, 1985. "Incidence Analysis of a Sector-Specific Minimum Wage in a Two-Sector Harris-Todaro Model," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(1), pages 207-224.
    5. Judith M. Dean & Shubhashis Gangopadhyay, 1997. "Export Bans, Environmental Protection, and Unemployment," Review of Development Economics, Wiley Blackwell, vol. 1(3), pages 324-336, October.
    6. Ichiroh Daitoh, 2003. "Environmental Protection and Urban Unemployment: Environmental Policy Reform in a Polluted Dualistic Economy," Review of Development Economics, Wiley Blackwell, vol. 7(3), pages 496-509, August.
    7. 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.
    8. 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.
    9. 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..
    10. J. Peter Neary, 1985. "International Factor Mobility, Minimum Wage Rates, and Factor-Price Equalization: A Synthesis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(3), pages 551-570.
    11. Kar, Saibal & Marjit, Sugata, 2001. "Informal sector in general equilibrium: welfare effects of trade policy reforms," International Review of Economics & Finance, Elsevier, vol. 10(3), pages 289-300, July.
    12. Bengt Kriström, 2003. "Framework for Assessing the Distribution of Financial Effects of Environmental Policies," Working Paper Series 03/337, Swedish University of Agricultural Sciences, Department of Forest Economics.
    13. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249.
    14. Falvey, R. & Tyers, R. & McDougall, R., 1997. "Trade Shocks and the Magnitude of Transmitted Wage Adjustments," Papers 318, Australian National University - Department of Economics.
    15. Magee, Stephen P, 1973. "Factor Market Distortions, Production, and Trade: A Survey," Oxford Economic Papers, Oxford University Press, vol. 25(1), pages 1-43, March.
    16. Chi‐Chur Chao & Joe R. Kerkvliet & Eden S. H. Yu, 2000. "Environmental Preservation, Sectoral Unemployment, and Trade in Resources," Review of Development Economics, Wiley Blackwell, vol. 4(1), pages 39-50, February.
    17. Jones, Ronald W, 1971. "Distortions in Factor Markets and the General Equilibrium Model of Production," Journal of Political Economy, University of Chicago Press, vol. 79(3), pages 437-459, May-June.
    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. M. Ali Khan, 2007. "The Harris-Todaro Hypothesis," Labor Economics Working Papers 22206, East Asian Bureau of Economic Research.
    2. 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.
    3. Subhasankar Chattopadhyay & Rima Mondal, 2017. "Characterisation of Economic Growth in Developing Economies with Informal Sector," Economic Papers, The Economic Society of Australia, vol. 36(1), pages 86-101, March.
    4. Yu Sheng & Xinpeng Xu, 2010. "Trade theorems with search unemployment," Canadian Journal of Economics, Canadian Economics Association, vol. 43(3), pages 795-815, August.
    5. Jonathan Temple, 2005. "Dual Economy Models: A Primer For Growth Economists," Manchester School, University of Manchester, vol. 73(4), pages 435-478, July.
    6. 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.
    7. Eic W. Bond & Robert A. Driskill, 2006. "On Indeterminacy in Two Sector Models with Factor Market Distortions: The Importance of VIPIRS," Vanderbilt University Department of Economics Working Papers 0626, Vanderbilt University Department of Economics.
    8. Devadoss, Stephen, 2007. "Market power in input purchase and trade," International Review of Economics & Finance, Elsevier, vol. 16(4), pages 478-487.
    9. Valeria Costantini & Francesco Crespi, 2013. "Public policies for a sustainable energy sector: regulation, diversity and fostering of innovation," Journal of Evolutionary Economics, Springer, vol. 23(2), pages 401-429, April.
    10. Rapanos, Vassilis T., 1995. "The effects of environmental taxes on income distribution," European Journal of Political Economy, Elsevier, vol. 11(3), pages 487-501, September.
    11. Mandal Biswajit, 2018. "Tax on Traded Goods, and Corrupt Non-traded Goods Sector: Implications for Intermediation Activities," Review of Economics, De Gruyter, vol. 69(1), pages 27-41, April.
    12. Ekundayo P. Mesagan & Wakeel A. Isola & Kazeem B. Ajide, 2019. "The capital investment channel of environmental improvement: evidence from BRICS," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 21(4), pages 1561-1582, August.
    13. Horatiu A. Rus, 2006. "Renewable Resources, Pollution and Trade in a Small Open Economy," Working Papers 2006.140, Fondazione Eni Enrico Mattei.
    14. 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.
    15. Jonathan Temple, 2002. "The Costs of Dualism," Bristol Economics Discussion Papers 02/532, School of Economics, University of Bristol, UK.
    16. Eden S. H. Yu & Chi‐Chur Chao, 2021. "Appropriation, firm dynamics, and wage inequality," International Journal of Economic Theory, The International Society for Economic Theory, vol. 17(1), pages 118-129, March.
    17. Fabio Antoniou & Panos Hatzipanayotou & Nikos Tsakiris, 2024. "Regulatory Stringency and Emission Leakage Mitigation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 87(6), pages 1407-1424, June.
    18. James R. Markusen, 2021. "Ronald Jones's duality analysis as a foundation for applied general‐equilibrium modeling," International Journal of Economic Theory, The International Society for Economic Theory, vol. 17(1), pages 6-19, March.
    19. Vassilis Rapanos, 2006. "Tax Incidence in a Model with Efficiency Wages and Unemployment," International Economic Journal, Taylor & Francis Journals, vol. 20(4), pages 477-494.
    20. Kul B. Bhatia, 2001. "Specific Inputs, Value-Added, and Production Linkages in Tax-Incidence Theory," Public Finance Review, , vol. 29(6), pages 461-486, November.

    More about this item

    Keywords

    Environmental Policy; Dualistic Economy; Distribution;
    All these keywords.

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

    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:unp:wpaper:200502. 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: Arief Anshory Yusuf (email available below). General contact details of provider: https://edirc.repec.org/data/lppadid.html .

    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.