Trade Policy and Natural Resource Use: The Case for a Quantitative Restriction

Susana Ferreira

Environmental & Resource Economics, 2007, vol. 37, issue 2, pages 361-376

Abstract: This paper presents a simple way for countries to reap the benefits of trade liberalization without exacerbating problems of overexploitation of natural resources. In the context of a Ricardo–Viner dynamic trade model, it is shown that when a binding quantitative restriction regulates extraction of a natural resource, free trade is optimal. This is true even if the quantitative restriction is not optimal. In contrast, in the presence of a suboptimal tax (including a zero tax in the special case of open access) on the use of natural resources, trade liberalization is not necessarily welfare improving. Copyright Springer Science+Business Media, Inc. 2007

Keywords: environmental regulations; natural resources; open access; quantitative restriction; tax; trade liberalization; second-best (search for similar items in EconPapers)
Date: 2007
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Persistent link: http://EconPapers.repec.org/RePEc:kap:enreec:v:37:y:2007:i:2:p:361-376

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