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1999
Journal Article
Titel
Environmental Quality with Endogenous Domestic and Trade Policies
Abstract
This paper analyzes environmental quality under different policy regimes in a small open political economy model with production or consumption externalities. In contrast to standard theory, it is shown that inefficient trade policies can lead to higher environmental quality than efficient domestic policies. For a production externality, lobbying by a polluting industry results in environmental quality that is lower than socially optimal for any policy, unless marginal environmental quality that is lower than socially optimal for any policy, unless marginal environmental quality (but not necessarily domestic resource allocation) will be optimal, when consumption, or trade and consumption policies are available.