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From Autarky to Free Trade: The Impact on Environment

Working paper
Author/s: 
Shlomo Weber and Hans Wiesmeth
Issue number: 
2001.033
Publisher: 
FEEM
Year: 
2001
PDF [1]
We consider a model with two countries, two commodities and production factors, labour and environment. The countries first choose their environmental standards and then the equilibrium market allocations are determined. We study a subgame perfect Nash equilibrium of this game for two types of environmental problems: regional and international. We examine effects resulting from the transition from autarky to free trade and show that regulating interference with supply and demand may have a positive effect on environmental standards. In particular, a transfer of commodity from one country to the other can increase welfare and raise environmental standards in both countries.
Tags: 
Trade Theory [2]

Source URL:http://coalitiontheory.org/content/autarky-free-trade-impact-environment

Links
[1] http://www.feem.it/userfiles/attach/Publication/NDL2001/NDL2001-033.pdf [2] http://coalitiontheory.org/research-areas/trade-theory