Working Paper: NBER ID: w8540
Authors: Brian R. Copeland; M. Scott Taylor
Abstract: This paper sets out a general equilibrium pollution and trade model to provide a framework for examination of the trade and environment debate. The model contains as special cases a canonical pollution haven model as well as the standard Heckscher-Ohlin-Samuelson factor endowments model. We draw quite heavily from trade theory, but develop a simple pollution demand and supply system featuring marginal abatement cost and marginal damage schedules familiar to environmental economists. We have intentionally kept the model simple to facilitate extensions examining the environmental consequences of growth, the impact of trade liberalization, and strategic interaction between countries.
Keywords: International Trade; Environment; General Equilibrium Model; Pollution Haven; Trade Liberalization
JEL Codes: F1; H4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| pollution (Q53) | production (L23) |
| production choices (D20) | environmental outcomes (Q56) |
| pollution tax (Q52) | emissions (Q52) |
| factor prices (F16) | pollution demand and supply (Q53) |
| price of dirty good (P22) | return to capital (E22) |
| price of dirty good (P22) | return to labor (J22) |