Trade, Transboundary Pollution and Market Size

Rikard Forslid, Toshihiro Okubo and Mark Sanctuary

No 9412, CEPR Discussion Papers from Centre for Economic Policy Research

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 (search for similar items in EconPapers)
JEL-codes: F12 F15 (search for similar items in EconPapers)
Date: 2013-03
New Economics Papers: this item is included in nep-ene, nep-env and nep-int
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Citations: View citations in EconPapers (4)

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Working Paper: Trade, Transboundary Pollution and Market Size (2013)
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