ENVIRONMENTAL PROTECTION WITH POLICIES FOR SALE

Joachim Schleich

No 51207, Working Papers from International Agricultural Trade Research Consortium

Abstract: This paper generalizes the Grossman-Helpman political economy model to characterize the structure of environmental and industry protection for a small open economy when domestic and/or trade policies are the outcome of a noncooperative common agency game between sector-specific producer lobbies and the government. For a consumption externality, the political equilibrium results if domestic and trade policies are available, are production-enhancing protection of organized industries, but the same environmental protection as Pigouvian taxes. Subsidies to organized industries counterbalance environmental taxes when there is a production externality, and it is ambiguous whether domestic or trade policy alone leads to more environmental protection. In addition, this paper demonstrates that the original Grossman-Helpman results arise as a special case that rests on the assumption that only trade policies are available to the government.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 33
Date: 1997
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:iatrwp:51207

DOI: 10.22004/ag.econ.51207

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