Common Ground Between Free-Traders and Environmentalists

We use a North-South model with property right differences and resource dynamics to study the effects of trade on resource use and welfare. Autarky is likely to Pareto-dominate free trade in the long run when the environment is quite fragile, and the result is reversed when the environment is quite resilient. Trade may cause an environmentally poor country to drag down" its richer trading partner; in this case, both countries degrade their stocks when these would be preserved under autarky. Alternatively, trade may enable the environmentally richer country to pull up" its partner; in this case both countries preserve their stocks when these would be degraded under autarky. These results rationalize the positions of environmentalists and free-traders. The direction of trade may change over time, but in steady states it is either inefficient or indeterminate. In the former case, a switch to autarky would increase global welfare.


Issue Date:
1999
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/25042
Total Pages:
50
JEL Codes:
D5; F1; O2; Q2
Series Statement:
CUDARE Working Paper 817




 Record created 2017-04-01, last modified 2017-08-24

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