FEEM working papers "Note di lavoro" series
2013 .070

Trade Liberalisation and Global-scale Forest Transition


Authors: Rafael González-Val, Fernando Pueyo
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Keywords: Forest Transition, Natural Resources, Industrial Location, Trade Liberalisation
JEL n.: F18, Q20, Q23, R12

Abstract

In this paper, we develop a theoretical model that provides an additional explanation for the forest transition based on a trade liberalisation scenario. Furthermore, in contrast with most explanations, in which the forest transition can only take place at a local level at the expense of other areas, ours is capable of supporting such phenomenon at a worldwide level. We introduce a renewable natural resource (wood), used as an input by manufacturing firms, in a framework with economic geography foundations: transport costs affect the distribution of firms between countries. In a general equilibrium, the results reproduce the forest transition at a global scale: a decrease in transport costs (in particular, that of the natural resource) has a negative effect on the worldwide stock of the natural resource in the short-term; however, this effect is offset during the transition as a consequence of industrial reallocation between countries and eventually disappears in the long-run.

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