The Long-Run Effects of Environmental Reform in Open Economies

38 Pages Posted: 25 Apr 2000

See all articles by Larry S. Karp

Larry S. Karp

University of California, Berkeley

Jinhua Zhao

Dyson School of Applied Economics and Management

Sandeep Sacheti

University of California, Berkeley; American Express

Date Written: January 2000

Abstract

We compare the effects of environmental reform and harmonization in the short and the long run, under autarky and free trade. With trade, harmonization of policies, even if achieved by lowering standards in one country, can improve short run aggregate welfare and increase the likelihood of reaching a good long run equilibrium. However, long run considerations favor a "race to the top" rather than a "race to the bottom". Under autarky, unilateral reform may have no short run effect; it may have no qualitative long run effect if the environment regenerates slowly. Trade increases the likelihood that coordinated environmental reform can improve welfare.

Keywords: International Trade and the Environment; Environmental Policy Reform; International Harmonization of Environmental Policies; Environmental Dynamics and Trade

JEL Classification: F10, H23, Q20

Suggested Citation

Karp, Larry S. and Zhao, Jinhua and Sacheti, Sandeep, The Long-Run Effects of Environmental Reform in Open Economies (January 2000). Available at SSRN: https://ssrn.com/abstract=223508 or http://dx.doi.org/10.2139/ssrn.223508

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)

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

Sandeep Sacheti

University of California, Berkeley

310 Barrows Hall
Berkeley, CA 94720
United States

American Express

Phoenix, AZ 85021
United States

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