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Per-capita income as a determinant of international trade and environmental policies

Author: James R Markusen; National Bureau of Economic Research.
Publisher: Cambridge, Mass. : National Bureau of Economic Research, 2013.
Series: Working paper series (National Bureau of Economic Research), no. 19754.
Edition/Format:   eBook : Document : EnglishView all editions and formats
Database:WorldCat
Summary:
International trade policy analysis has tended to focus on the production side of general equilibrium, with policies such as a tariff or carbon tax affecting international and internal income distributions through a Heckscher-Ohlin nexus of factor intensities and factor endowments. Here I move away from this structure to focus on demand and preferences. The specific context is an international environmental  Read more...
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Material Type: Document, Internet resource
Document Type: Internet Resource, Computer File
All Authors / Contributors: James R Markusen; National Bureau of Economic Research.
OCLC Number: 868019437
Notes: Title from http://www.nber.org/papers/19754 viewed January 13, 2014.
"December 2013."
Description: 1 online resource (28, [5], 5 pages) : illustrations.
Series Title: Working paper series (National Bureau of Economic Research), no. 19754.
Responsibility: James R. Markusen.

Abstract:

International trade policy analysis has tended to focus on the production side of general equilibrium, with policies such as a tariff or carbon tax affecting international and internal income distributions through a Heckscher-Ohlin nexus of factor intensities and factor endowments. Here I move away from this structure to focus on demand and preferences. The specific context is an international environmental externality such as carbon emissions, and I assume a high income elasticity of demand for environmental quality. I analyze how per-capita income differences between two countries affect their abatement efforts in a non-cooperative policy-setting game. This outcome can then be used as a disagreement point to analyze cooperative Nash bargaining. In both outcomes, the poor country makes a lower abatement effort in equilibrium; indeed, it may make none at all and cooperative bargaining with only abatement levels as an instrument may offer no gains. Other features include a novel terms-of-trade externality in which an abating country passes on a part of its abatement cost to its trading partner, in which case the non-cooperative and cooperative outcomes are identical under special symmetry assumptions. When per-capita income differences are large, the poor country may be worse off when the rich country abates. Finally, I examine "issue linking" in international bargaining, in which one country is both large and rich, and hence has both a high tariff and a high abatement effort in a non-cooperative equilibrium.

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