Economics at your fingertips  

The dynamic impact of unilateral environmental policies

David Hemous

Journal of International Economics, 2016, vol. 103, issue C, 80-95

Abstract: This paper builds a two-country, two-sector (polluting, nonpolluting) trade model with directed technical change, examining whether unilateral environmental policies can ensure sustainable growth. The emission rate of the polluting sector depends on its relative use of a clean and a dirty input. A unilateral policy combining clean research subsidies and a trade tax can ensure sustainable growth, while unilateral carbon taxes alone increase innovation in the polluting sector abroad and generally cannot ensure sustainable growth. Relative to autarky and exogenous technical change respectively, trade and directed technical change accelerate environmental degradation either under laissez-faire or with unilateral carbon taxes, yet both help reduce environmental degradation under the appropriate unilateral policy. I characterize the optimal unilateral policy analytically and numerically using calibrated simulations. Knowledge spillovers have the potential to reduce the otherwise large welfare costs of restricting policy to onecountry.

Keywords: Climate change; Environment; Directed technical change; Innovation; Trade; Unilateral policy (search for similar items in EconPapers)
JEL-codes: F18 F42 O30 O41 Q55 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and Rodríguez-Clare, Andrés

More articles in Journal of International Economics from Elsevier
Series data maintained by Dana Niculescu ().

Page updated 2018-03-05
Handle: RePEc:eee:inecon:v:103:y:2016:i:c:p:80-95