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Optimal Pollution Standard in an Open Economy: Characterizing Environmental Diversity
Author(s) -
Das Satya P.
Publication year - 2001
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.00290
Subject(s) - autarky , economics , open economy , pollution , small open economy , ranking (information retrieval) , free trade , international economics , diversity (politics) , international trade , natural resource economics , macroeconomics , ecology , market economy , biology , welfare , machine learning , exchange rate , computer science , sociology , anthropology
The paper examines the optimal pollution standard for a large open economy. Using a two‐country partial‐equilibrium framework, the optimal standards are charaterized for autarky, free trade, and free trade together with cooperation among countries in setting standards. If pollution is local, at the free‐trade equilibrium, the exporting country imposes a stricter standard than does the importing country. The ranking may be reversed if pollution is transnational. A surpriising implication is that if pollution is local, cooperation may imply a less stringent standard for both the exporting country and the importing country.