Trade, Transboundary Pollution and Market Size

19 Pages Posted: 3 Apr 2013

See all articles by Rikard Forslid

Rikard Forslid

Stockholm University; Centre for Economic Policy Research (CEPR)

Toshihiro Okubo

University of Geneva - Graduate Institute of International Studies (HEI)

Mark Sanctuary

The Royal Swedish Academy of Sciences - Beijer International Institute of Ecological Economics; IVL Swedish Environmental Research Institute; Stockholm University - Department of Economics

Date Written: March 2013

Abstract

This paper uses a monopolistic competitive framework with many sectors to study the impact of trade liberalization on local and global emissions. We focus on the interplay of the pollution haven effect and the home market effect and show how a large-market advantage can counterbalance a high emission tax, implying that trade liberalization leads to lower global emissions. Generally, our results suggest that relative market size, the level of trade costs, the ease of abatement, and the degree of product differentiation at the sector level are relevant variables for empirical studies on trade and pollution.

Keywords: market size, trade liberalization, transboundary pollution

JEL Classification: F12, F15

Suggested Citation

Forslid, Rikard and Okubo, Toshihiro and Sanctuary, Mark, Trade, Transboundary Pollution and Market Size (March 2013). CEPR Discussion Paper No. DP9412, Available at SSRN: https://ssrn.com/abstract=2244092

Rikard Forslid (Contact Author)

Stockholm University ( email )

Universitetsvägen 10 A
House A, floor 4 and 7
Frescati, Stockholm
Sweden
+46 8 16 3096 (Phone)
+46 8 15 9482 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Toshihiro Okubo

University of Geneva - Graduate Institute of International Studies (HEI) ( email )

PO Box 136
Geneva, CH-1211
Switzerland
+41 22 908 5900 (Phone)

Mark Sanctuary

The Royal Swedish Academy of Sciences - Beijer International Institute of Ecological Economics ( email )

The Royal Swedish Academy of Sciences
P.O. Box 50005
S-104 05 Stockholm, SE-104 05
United States

IVL Swedish Environmental Research Institute ( email )

Valhallavägen 81
Stockholm, 114 27
Sweden

HOME PAGE: http://www.ivl.se

Stockholm University - Department of Economics ( email )

Universitetsvägen 10 A
House A, floor 4 and 7
Frescati, Stockholm
Sweden

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