Agricultural trade and the environment: Domestic versus global perspectives
1997
Schamel, G. (Humboldt-Universitaet, Berlin (Germany). Landwirtschaftlich-Gaertnerische Fakultaet. Inst. fuer Agrarpolitik, Marktlehre und Agrarentwicklung)
A general-equilibrium model is developed to assess optimal and sub-optimal environmental and trade policy interventions in the presence of a negative externality (pollution). The model distinguishes between abatement and output reduction as means to reduce pollution and differentiates domestic and global perspectives when analyzing alternative environmental and/or trade policy combination. Via trade, domestic environmental policies affect the welfare in other countries, stipulating domestic and global optima. Terms of trade effects due to domestic and trade policies are distinguished and various optimal policy parameters for large countries are derived. The results indicate that any policy instrument may adversely affect global welfare. Even without trade taxes, large importers (exporters) can raise their welfare by taxing production below (above) marginal external costs created while simultaneously subsidizing abatement above (below) marginal social damage avoided.
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