Common Ground between Free-Traders and Environmentalists

48 Pages Posted: 23 Mar 2000

See all articles by Larry S. Karp

Larry S. Karp

University of California, Berkeley

Sandeep Sacheti

University of California, Berkeley; American Express

Jinhua Zhao

Dyson School of Applied Economics and Management

Date Written: May 24, 1998

Abstract

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.

JEL Classification: D5, F1, O2, Q2

Suggested Citation

Karp, Larry S. and Sacheti, Sandeep and Zhao, Jinhua, Common Ground between Free-Traders and Environmentalists (May 24, 1998). Available at SSRN: https://ssrn.com/abstract=207048 or http://dx.doi.org/10.2139/ssrn.207048

Larry S. Karp

University of California, Berkeley ( email )

Dept. of Agriculture & Resource Economics
313 Giannini Hall
Berkeley, CA 94720
United States
510-643-8911 (Fax)

Sandeep Sacheti

University of California, Berkeley

310 Barrows Hall
Berkeley, CA 94720
United States

American Express

Phoenix, AZ 85021
United States

Jinhua Zhao (Contact Author)

Dyson School of Applied Economics and Management ( email )

Ithaca, NY 14850
United States

HOME PAGE: http://https://sites.google.com/view/jinhuazhao

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