Impact of trade on the environment

An inter­est­ing result in a book that has “just appeared(link to Prince­ton books)”:http://pup.princeton.edu/titles/7605.html (although the data are rather old)

bq. “The authors set out the two lead­ing the­o­ries link­ing inter­na­tion­al trade to envi­ron­men­tal out­comes, devel­op the empir­i­cal impli­ca­tions, and exam­ine their valid­i­ty using data on mea­sured sul­fur diox­ide con­cen­tra­tions from over 100 cities world­wide dur­ing the peri­od from 1971 to 1986 “[empha­sis added]. bq. The empir­i­cal results are provoca­tive. For an aver­age coun­try in the sam­ple, free trade is good for the envi­ron­ment. There is lit­tle evi­dence that devel­op­ing coun­tries will spe­cial­ize in pol­lu­tion-inten­sive prod­ucts with fur­ther trade. In fact, the results sug­gest just the oppo­site: free trade will shift pol­lu­tion-inten­sive goods pro­duc­tion from poor coun­tries with lax reg­u­la­tion to rich coun­tries with tight reg­u­la­tion, there­by low­er­ing world pol­lu­tion. The results also sug­gest that pol­lu­tion declines amid eco­nom­ic growth fueled by econ­o­my-wide tech­no­log­i­cal progress but ris­es when growth is fueled by cap­i­tal accu­mu­la­tion alone”

“Trade and Envi­ron­ment: The­o­ry & Evidence(link to Princ­ton book sales)”:http://pup.princeton.edu/titles/7605.html


The two “lead­ing the­o­ries”, it turns out are real­ly two impor­tant ques­tions: # What is the impact on the envi­ron­ment of the increased eco­nom­ic activ­i­ty that fol­lows trade lib­er­al­iza­tion?
# What impact does an envi­ron­men­tal pol­i­cy have on a nation’s trade pat­tern? The authors—Brian Copeland and M Scott Taylor—conclude that trade lib­er­al­iza­tion that increas­es the scale of eco­nom­ic activ­i­ty will lead to ‘clean­er’ pro­duc­tion tech­niques; the full envi­ron­men­tal impact can­not be deter­mined a pri­ori how­ev­er but only by empir­i­cal inves­ti­ga­tion. They employ GE mod­el­ling tech­niques to come up with their gen­er­al result. bq. “… we esti­mate that a trade lib­er­al­iza­tion that rais­es the scale of eco­nom­ic activ­i­ty by 1% rais­es pol­lu­tion con­cen­tra­tions by 0.25 to 0.5% via the scale effect, but the accom­pa­ny­ing increase in incomes per capi­ta dri­ves con­cen­tra­tions down by 1.25–1.5% via a tech­nique effect. These esti­mates imply a strong pol­i­cy response to trade-inspired income gains. As we show, they also imply that eco­nom­ic growth cre­at­ed by neu­tral tech­no­log­i­cal progress will both raise real incomes and improve envi­ron­men­tal qual­i­ty, but eco­nom­ic growth fueled by cap­i­tal accu­mu­la­tion alone will wors­en the envi­ron­ment.”

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