Trade and the Risk of Renewable-Resource Collapse

Johan Gars and Daniel Spiro

Journal of the Association of Environmental and Resource Economists, 2018, vol. 5, issue 1, 155 - 206

Abstract: Does international trade increase the risk of renewable-resource collapse? We show that the answer is affirmative if trade increases the variety of goods and the resource is harvested under open access. Then there is increased likelihood of collapse both as a steady-state outcome and following shocks to the stock. Two separate mechanisms underlie the results. (1) Trade gives resource harvesters access to new varieties of goods. To enable buying these goods, they exert more harvesting effort. (2) The resource constitutes a new variety for other countries, implying that the resource price increases with trade openness, especially when the stock is small, which makes the resource “exclusive.” Unlike in the existing literature, which predicts that trade cannot lead to collapse, each of our two mechanisms can cause collapse and they both increase the vulnerability to shocks. We present several examples of collapses that can plausibly be attributed to each of the mechanisms.

Date: 2018
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