Abstract
To approach the question whether tariffs may serve as environmental policy instruments, this chapter develops a theoretical framework in which issues regarding trade and environmental policy can be incorporated.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
We drop the term dp/dg since policy measures in small countries do not affect the world price level by assumption.
In our model, this factor price differential corrects an (environmental) distortion. However, analytically it is similar to factor price distortions analysed in the 1970s.
In the remainder, we will go back and forth between assumption of CRS and the weaker non-increasing returns to scale. As a rule, we use CRS whenever the less restrictive assumption does not lend itself to interpretable results.
We assume throughout our study that factor intensities are not reversed by environmental regulation.
On the question of the slope of the production possibility frontier in the presence of taxes that distort the factor market see Bhagwati & Srinivasan [1971], Herberg & Kemp [1971] and Jones [1971]. For graphic representations of the effects of the environmental tax g on capital in the x sector, we shall assume that the shape of the production possibility frontier does in fact remain concave to the origin.
See for example Markusen et al. [1995, 98pp] or Gandolfo [1994, 76pp].
We observe opposite effects yet the same indeterminacy in a capital-abundant country.
If the tax is set too high, the tariff would bring pollution closer to its optimal level and the environmental effect would be positive; see Rauscher [1991b, 20]. The increase in consumption utility is illustrated in figure 3–4; as the tariff shifts p F towards p A , consumption occurs on a higher utility indifference curve.
We use again the full employment condition in the way described in footnote 11 above.
In the other three constellations (labour-abundant country where a tax below the Pigouvian tax is chosen, capital-abundant country with a tax higher or lower than the Pigouvian level) the suboptimal environmental policy also implies that τ ≠1. However, optimal policy choices are different, namely: a labour-abundant country in which eco-dumping is pursued subsidises imports; a capital-abundant country with a tax below the Pigouvian level taxes exports; a capital-abundant country in which the tax is set above the Pigouvian level subsidises exports.
Again, we have two opposite forces at work: the increase in pollution, and the production substitution towards x tend to increase g, while consumption substitution towards y which becomes relatively cheaper owing to the tariff has a tax-reducing effect.
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2000 Springer Science+Business Media Dordrecht
About this chapter
Cite this chapter
Kraus, C. (2000). An International Trade Model with Pollution and Eco-tariffs. In: Import Tariffs as Environmental Policy Instruments. Economy & Environment, vol 19. Springer, Dordrecht. https://doi.org/10.1007/978-94-015-9614-5_3
Download citation
DOI: https://doi.org/10.1007/978-94-015-9614-5_3
Publisher Name: Springer, Dordrecht
Print ISBN: 978-90-481-5461-6
Online ISBN: 978-94-015-9614-5
eBook Packages: Springer Book Archive