Environmental standards, resource depletion, and trade stability: a two-country model of cross-border pollution

Gökhan Güven ()
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Gökhan Güven: Sakarya University

Economic Change and Restructuring, 2025, vol. 58, issue 6, No 6, 55 pages

Abstract: Abstract This study aims to explain the trade instability in countries with less stringent environmental standards. Constructing a theoretical model involving two countries illustrates how differences in resource management standards in the context of transboundary pollution can affect potentially stable trade patterns and post-trade welfare outcomes influenced by environmental pressures, such as overharvesting and transboundary pollution. The findings suggest that if the pollution externality outweighs the open-access problem in trading countries, a stable trade pattern is likely when the degree of transboundary pollution is small, even if resource stocks decline. However, when the damage from the open-access problem is more severe, a stable trade pattern cannot be expected. From a policy perspective, these results can help governments promote a more stable post-trade environment. One policy suggestion is to encourage the expansion of pollution-producing sectors with green transformation to promote the contraction of resource-intensive industries and prioritize actions to minimize transboundary pollution. This can help create a balance and ensure sustainable economic growth for developing countries, possibly by sharing cross-border pollution with trading partners.

Keywords: Renewable resource; Transboundary pollution; International trade; Stable trade patterns (search for similar items in EconPapers)
JEL-codes: F18 H23 Q20 Q53 Q56 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10644-025-09921-z

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