Working Paper
Globalization, Cross-Border Pollution and Welfare
Panos Hatzipanayotou, Sajal Lahiri, Michael S. Michael
CESifo, Munich, 2005
CESifo Working Paper No. 1479
CESifo, Munich, 2005
CESifo Working Paper No. 1479
We construct a two-good general equilibrium model of international trade for two small open economies where pollution from production is transmitted across borders. Governments in both countries impose emission taxes non-cooperatively. Within this framework, we examine the effect of trade liberalization and of changes in the perception of cross-border pollution on Nash emission taxes, emission levels, and welfare.
Keywords: cross-border pollution, emission taxes, terms of trade, globalization, welfare