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From Autarky to Free Trade: The Impact on Environment
Shlomo Weber Southern Methodist University (SMU) - Department of Economics Hans Wiesmeth Dresden University of Technology - Faculty of Economics and Business Management June 2001 FEEM Working Paper No. 33.2001 Abstract: We consider a model with two countries, two commodities and production factors, labour and environment. The countries first choose their environmental standards and then the equilibrium market allocations are determined. We study a subgame perfect Nash equilibrium of this game for two types of environmental problems: regional and international. We examine effects resulting from the transition from autarky to free trade and show that regulating interference with supply and demand may have a positive effect on environmental standards. In particular, a transfer of commodity from one country to the other can increase welfare and raise environmental standards in both countries.
Keywords: Free trade, autarky, environmental standards, international and regional environmental problems JEL Classifications: F18, C72 Working Paper SeriesDate posted: July 30, 2001 ; Last revised: September 01, 2001Suggested CitationContact Information
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