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Common Ground Between Free‐Traders and Environmentalists[Note 2. Manuscript received March 1999; revised August 1999. ...]
Author(s) -
Karp Larry,
Sacheti Sandeep,
Zhao Jinhua
Publication year - 2001
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/1468-2354.00127
Subject(s) - autarky , economics , resource (disambiguation) , natural resource economics , free trade , welfare , gains from trade , pareto principle , microeconomics , business , international trade , international economics , market economy , operations management , computer science , computer network
We use a North–South model with property right differences and resource dynamics to study the effects of trade on resource use and welfare. Autarky is likely to Pareto‐dominate free trade in the long run when the environment is quite fragile, and the result is reversed when the environment is quite resilient. Trade may cause an environmentally poor country to “drag down” its richer trading partner, when they degrade their stocks which would be preserved under autarky. It may enable the environmentally richer country to “pull up” its partner, when they preserve their stocks which would be degraded under autarky.