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Environmental Policy in Open Economies and Monopolistic Competition

Alexander Haupt ()

Environmental & Resource Economics, 2006, vol. 33, issue 2, 143-167

Abstract: This paper analyses the implications of international trade for non-cooperative environmental policy in the case of local production externalities. A particular focus is on the potential effects of regulations on the variety of goods and the resulting international spillover caused by trade. A tougher domestic standard negatively affects the utility of the households abroad, since such a policy reduces their variety of imports (due to fewer domestic product inventions) or their consumption of each imported brand (due to higher import prices). Ignoring the negative spillover, non-cooperative governments implement inefficiently strict standards in equilibrium. In contrast to this clear-cut inefficiency result, the impact of international trade on the state of the environment is ambiguous. Copyright Springer 2006

Keywords: environmental policy; international trade; monopolistic competition; open economies; process standards; Q28; F13; F12 (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1007/s10640-005-2645-x

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