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Environmental Quality and Industry Protection with Noncooperative Versus Cooperative Domestic and Trade Policies

: Schleich, J.; Orden, D.


Review of international economics 8 (2000), No.4, pp.681-697
ISSN: 0965-7576
ISSN: 1467-9396
Journal Article
Fraunhofer ISI ()
industrielle Umweltbelastung; Protektionismus; Außenwirtschaftspolitik; externer Effekt; Interessenpolitik; Theorie

This paper characterizes environmental quality and industry protection in a large-country Gross-Helpmann model when production or consumption externalities exist and governments decide noncooperatively on domestic and trade policies. Governments choose policies efficiently from among those available, but competitive lobbies may prefer less efficient regimes. Under restricted policy availability, political-support effects can offset terms-of-trade effects on equilibration outcomes and inefficient trade policies can lead to higher environmental quality than efficient domestic policies. If governments cooperate, they can satisfy particular organized industries at lower costs to other lobbies and total welfare. This may result in lower environmental quality than noncooperation.