Economic Integration, Environmental Harmonization and Firm Relocation

Environment and Development Economics, Vol. 12, No. 3, pp. 379-402, June 2007

Posted: 3 Mar 2008

See all articles by Edward B. Barbier

Edward B. Barbier

Colorado State University, Fort Collins - Department of Economics

Patrik T. Hultberg

Kalamazoo College - Department of Economics & Business

Abstract

As different regions of the world integrate, many questions arise regarding the effect on the location of firms. A firm's decision to relocate operations when its home country integrates with another region is in general influenced by the relative marginal cost of production between the regions, the cost of relocation, the cost of exporting its goods across borders, as well as the relative size of the two regions. Except for market size, these variables crucially depend upon the degree of economic integration, ranging from simple bilateral trade agreements, to agreements that make foreign direct investment easier and cheaper, to full economic integration that harmonizes policies across the regions. We develop a model in which we explore the possible forms of integration in the context of two illustrative applications: US-Mexico under NAFTA and Central and Eastern European countries and the European Union.

Suggested Citation

Barbier, Edward B. and Hultberg, Patrik T., Economic Integration, Environmental Harmonization and Firm Relocation. Available at SSRN: https://ssrn.com/abstract=1020399

Edward B. Barbier (Contact Author)

Colorado State University, Fort Collins - Department of Economics ( email )

Fort Collins, CO 80523-1771
United States

Patrik T. Hultberg

Kalamazoo College - Department of Economics & Business ( email )

1200 Academy Street
Kalamazoo, MI 49006
United States
269-337-7027 (Phone)

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