International Trade and the Environment: Theoretical and Policy Linkages |
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Authors: | J Peter Neary |
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Institution: | (1) Department of Economics, University College Dublin and CEPR Belfield, Dublin, Ireland |
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Abstract: | I review and extend three approaches to trade and environmental policies: competitive general equilibrium, oligopoly and monopolistic
competition. The first two have surprisingly similar implications: deviations from first-best rules are justified only by
constraints on policy choice (which motivates what I call a “single dividend” approach to environmental policy), and taxes
and emissions standards differ in ways which reflect the Le Chatelier principle. I also show how environmental taxes may lead
to a catastrophic relocation of industry in the presence of agglomeration effects, although not necessarily if there is a
continuum of industries which differ in pollution intensity.
*An earlier version was presented as an invited plenary lecture to the European Association for Environmental and Resource
Economics Conference, Oslo, 1999. |
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Keywords: | environmental policy international trade policy location and economic geography pollution abatement strategic trade policy |
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