Unprotected Resources and Voracious World Markets

Michael Margolis and Jason Shogren

No 10635, Discussion Papers from Resources for the Future

Abstract: The Theory of the Second Best implies that any country with less-than-ideal resources can lose from international trade. Recently it has been suggested this means the South (poor countries) are better off suppressing trade with the North, especially trade in natural resource products, since the North has better developed rights to protect its natural resources. Here we show that the suppression of such trade may also impede the development of property rights in the South, but that even taking this into account, trade liberalization need not improve Southern welfare. We find that within a cone of world prices on the boundary of which lies the South's autarky price vector, welfare losses still occur even when local governments in the South make optimal choices to enclose the hinterlands. Corollary to the losses, the South can gain from tariffs or quotas and, within a proper subset of the cone of loss, can suffer when the prices of its exports rise.

Keywords: International; Relations/Trade (search for similar items in EconPapers)
Pages: 37
Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Working Paper: Unprotected Resources and Voracious World Markets (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:rffdps:10635

DOI: 10.22004/ag.econ.10635

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