Trade, environment and market access: policy reforms in a small open economy

Shinya Kawahara

Environment and Development Economics, 2014, vol. 19, issue 2, 173-181

Abstract: This paper investigates how market access and welfare are affected by piecemeal reforms of tariffs and pollution taxes in a small open economy. By constructing a general equilibrium model of international trade, which is extended to allow production-generated pollution, we characterize conditions under which a tariff reform and a pollution tax reform increase the value of the small country's imports. It is shown that uniform proportional cuts in tariffs that increase welfare do not necessarily improve market access, and the Ju–Krishna rule of tariff reforms that improves market access does not necessarily increase welfare. A reduction in all pollution distortions proportional to their degree of distortion can be shown to improve both welfare and market access.

Date: 2014
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