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Trade, Transboundary Pollution and Market Size

Rikard Forslid (), Toshihiro Okubo () and Mark Sanctuary ()

No 2013:8, Research Papers in Economics from Stockholm University, Department of Economics

Abstract: This paper uses a monopolistic competitive framework with many sectors to study the impact of trade liberalization on local and global emissions. We focus on the interplay of the pollution haven effect and the home market effect and show how a large-market advantage can counterbalance a high emission tax, implying that trade liberalization leads to lower global emissions. Generally, our results suggest that relative market size, the level of trade costs, the ease of abatement, and the degree of product differentiation at the sector level are relevant variables for empirical studies on trade and pollution.

Keywords: market size; emission tax; trade liberalization (search for similar items in EconPapers)
JEL-codes: D21 F12 F15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env and nep-res
Date: 2013-04-17
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