Abstract
In this chapter1, we will present a theoretical analysis of the participation decisons of countries into an international environmental agreement in the presence of international trade. We will model international environmental agreements (IEAs) as global public good, and the decision to join an IEA will be matched with contributions to the production ofthis good by each government. Since global protection confers benefits on all countries regardless of their contribution(presence of free-riding, we try to determine (i) how-much each country will contribute, if any; (ii) the factors which affect the level of contributions; (iii) comparison of global environmental protection when countries do not cooperate versus when they cooperate; and finally, (iv) the impact of free trade on these results.
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Notes
This chapter is based on my paper titled “Does Trade Always Harm the Global Environment? A Case for Positive Interaction,” Oxford Economic Papers 50,272-288; with the permission of Oxford University Press.
For simplicity, we will assume that there is only one consumer in both home and foreign country, or many consumers with identical utility functions so that we can use a social utility function which is equal to the sum of the individual utility functions, as in Smith and Espinosa (1996).
Note that trade balance together with budget constraints results in the equality of demand and supply worldwide, i.e., X + X* = Xs, and Y + Y* = Ys, where X s and Ys represent supply of goods.
Recall that home country exports X and imports Y.
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© 2002 Springer Science+Business Media Dordrecht
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Alpay, S. (2002). Global Environmental Protection and Trade. In: Trade and The Environment. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-0271-5_13
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DOI: https://doi.org/10.1007/978-1-4615-0271-5_13
Publisher Name: Springer, Boston, MA
Print ISBN: 978-1-4613-4997-6
Online ISBN: 978-1-4615-0271-5
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