Globalization of markets and consumption home bias: new insights for the environment

Ornella Tarola and Skerdilajda Zanaj

Environment and Development Economics, 2023, vol. 28, issue 6, 580-602

Abstract: We propose a model of international oligopoly with two countries, two vertically-differentiated goods, and heterogeneous consumers in terms of their willingness to pay for quality. Various sources of pollution are taken into account: consumption, production and the transportation of goods between the two countries. Green persuaded consumers display consumption home bias: they derive additional satisfaction when consuming a domestic good because buying locally abates transportation pollution. We investigate whether consumption home bias effectively curbs global emissions. Finally, we uncover the environmental role played by the globalization of markets.

Date: 2023
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