From Autarky to Free Trade: The Impact on Environment
Data
01.01.2001
01.01.2001
Autori
Shlomo Weber
Codice JEL
F18,C72
F18,C72
Parole chiave:
Free trade,autarky,environmental standards,international and regional environmental problems
Free trade,autarky,environmental standards,international and regional environmental problems
Publisher
Climate Change and Sustainable Development
Climate Change and Sustainable Development
Editor
Carlo Carraro
Carlo Carraro
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.