Environmental regulation and trade openness in the presence of private mitigation

Louis Hotte () and Stanley Winer ()

Journal of Development Economics, 2012, vol. 97, issue 1, 46-57

Abstract: Acknowledging the differential ability of individuals to privately mitigate the consequences of domestic pollution for their health is essential for an understanding of their demands for regulation of the environment and of trade in dirty goods, and for analysis of the implications of these demands for equilibrium policy choices. In a small open economy with exogenous policy, we first explain how private mitigation at a cost results in an unequal distribution of the health consequences of pollution in a manner consistent with epidemiologic studies, and consequently how the benefits and costs of trade in dirty goods interact with choices concerning private mitigation to further polarize the interests of citizens concerning environmental stringency. The economy is then embedded in a broader political economy setting, and simulated to investigate the role of private mitigation in shaping political equilibria. We show that when citizens can choose between mitigating the health consequences of domestic pollution privately and reducing pollution through public policy, the same polarization of interests underlies equilibrium policy choices in both democratic and autocratic regimes.

Keywords: Environmental regulation; Pollution; Private mitigation; Defensive measures; Avoidance activities; Health; Trade; Dirty goods; Individual welfare; Democracy; Representation theorem; Autocracy (search for similar items in EconPapers)
JEL-codes: D7 F18 Q56 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:97:y:2012:i:1:p:46-57

DOI: 10.1016/j.jdeveco.2011.01.004

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