Trade And the Environment

by Copeland, Brian; Taylor, M. Scott

• ISBN13: 9780691124001
• ISBN10: 0691124000
• Format: Paperback
• Copyright: 2005-07-18
• Publisher: Princeton Univ Pr

Summary

Nowhere has the divide between advocates and critics of globalization been more striking than in debates over free trade and the environment. And yet the literature on the subject is high on rhetoric and low on results. This book is the first to systematically investigate the subject using both economic theory and empirical analysis. Brian Copeland and Scott Taylor establish a powerful theoretical framework for examining the impact of international trade on local pollution levels, and use it to offer a uniquely integrated treatment of the links between economic growth, liberalized trade, and the environment. The results will surprise many. The authors set out the two leading theories linking international trade to environmental outcomes, develop the empirical implications, and examine their validity using data on measured sulfur dioxide concentrations from over 100 cities worldwide during the period from 1971 to 1986. The empirical results are provocative. For an average country in the sample, free trade is good for the environment. There is little evidence that developing countries will specialize in pollution-intensive products with further trade. In fact, the results suggest just the opposite: free trade will shift pollution-intensive goods production from poor countries with lax regulation to rich countries with tight regulation, thereby lowering world pollution. The results also suggest that pollution declines amid economic growth fueled by economy-wide technological progress but rises when growth is fueled by capital accumulation alone. Lucidly argued and authoritatively written, this book will provide students and researchers of international trade and environmental economics a more reliable way of thinking about this contentious issue, and the methodological tools with which to do so.

Table of Contents

Preface	vii
1 The Trade and Environment Debate	1	(11)
1.1 Globalization and the Trade versus Environment Debate	1	(1)
1.2 Two Questions and a Preview of Our Answers	2	(4)
1.3 Our Method of Analysis	6	(3)
1.4 Plan of the Book	9	(3)
2 Pollution in a Small Open Economy	12	(55)
2.1 Technology	16	(10)
2.2 Equilibrium along the Net and Potential Production Frontiers	26	(19)
2.3 Scale, Composition, and Technique Effects	45	(11)
2.4 Endogenous Pollution Policy	56	(9)
2.5 Conclusion	65	(2)
3 Is There an Environmental Kuznets Curve?	67	(40)
3.1 Equilibrium Pollution and the Environmental Kuznets Curve	71	(3)
3.2 Sources of Growth	74	(4)
3.3 Income Effects	78	(8)
3.4 Threshold Effects	86	(11)
3.5 Increasing Returns to Abatement	97	(7)
3.6 Conclusion	104	(3)
4 Trade Liberalization and Environmental Quality	107	(35)
4.1 Trade Frictions	110	(2)
4.2 Trade Liberalization with Rigid Pollution Policy	112	(11)
4.3 Trade Liberalization with Flexible Pollution Policy	123	(9)
4.4 The Political Economy Motive	132	(7)
4.5 Conclusion	139	(3)
5 Pollution Haven Models of International Trade	142	(45)
5.1 Exogenous Policy Differences: Rigid Emission Intensities	146	(7)
5.2 Exogenous Policy Differences: Marketable Permit Systems	153	(5)
5.3 Endogenous Pollution Havens	158	(6)
5.4 Global Pollution and the World Composition Effect	164	(6)
5.5 Environmentally Friendly Pollution Havens	170	(1)
5.6 Northern and Southern Institutional Differences	171	(12)
5.7 Conclusion	183	(4)
6 Factor Endowments, Policy Differences, and Pollution	187	(28)
6.1 Exogenous Policy: The Role of Factor Endowments	189	(7)
6.2 Endogenous Policy: Factor Endowments and Comparative Advantage	196	(4)
6.3 Correlated Characteristics: Being Rich and Capital Abundant	200	(6)
6.4 An Illustrative Example	206	(7)
6.5 Conclusion	213	(2)
7 Is Free Trade Good for the Environment? An Empirical Assessment	215	(60)
7.1 Three Questions That Deserve an Answer	220	(3)
7.2 The Pollution Data	223	(4)
7.3 Deriving the Reduced Form	227	(12)
7.4 From Theory to Estimation	239	(11)
7.5 Empirical Results	250	(11)
7.6 Alternative Specifications and Theories	261	(10)
7.7 Conclusion	271	(4)
8 Summary and Conclusions	275	(10)
8.1 Flexible Pollution Policy	275	(1)
8.2 Growth Is Not Trade	276	(1)
8.3 The Pollution Haven and Factor Endowments Hypotheses	277	(3)
8.4 Directions for Future Research	280	(5)
References	285	(6)
Index	291