The Demands for Environmental Regulation and for Trade in the Presence of Private Mitigation

34 Pages Posted: 23 Dec 2008

See all articles by Louis Hotte

Louis Hotte

University of Ottawa

Stanley L. Winer

Carleton University - School of Public Policy and Administration; Carleton University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2008

Abstract

We study the nature of individual demands for environmental regulation and for trade openness in the general equilibrium of a small open economy where the environment is an input to production. Differences in the ability of individuals to afford private mitigation of the adverse consequences of pollution is a central feature of the analysis. Private mitigation leads to an endogenous, unequal distribution of the health-related consequences of pollution across income groups in a manner consistent with epidemiologic studies, in contrast to much of the literature which assumes equal health effects for all. We show that when private mitigation is possible at a cost, trade polarizes the interests of rich and poor with respect to the stringency of regulation. Moreover, even though trade has the potential to benefit everyone, the poor may oppose trade openness because of a concern that laxer environmental regulation will then be imposed in the interest of the rich. We explain why heterogeneity in the intensity of preferences, and not just in their direction, is likely to play a role in the determination of collective choices with respect to the regulation of the environment and of trade. We conclude by drawing out the implications of the analysis for the study of the political economy of the environment-trade-welfare nexus.

Keywords: regulation, environment, pollution, private mitigation, trade, welfare, health, collective choice

JEL Classification: D7, F18, Q56

Suggested Citation

Hotte, Louis and Winer, Stanley L., The Demands for Environmental Regulation and for Trade in the Presence of Private Mitigation (December 2008). CESifo Working Paper Series No. 2509. Available at SSRN: https://ssrn.com/abstract=1319677

Louis Hotte

University of Ottawa ( email )

Department of Economics
55 Laurier E.
Ottawa, Ontario K1N 6N5
Canada
+161 356 25800 1692 (Phone)
+161 356 25999 (Fax)

HOME PAGE: http://aix1.uottawa.ca/~lhott3/

Stanley L. Winer (Contact Author)

Carleton University - School of Public Policy and Administration ( email )

1125 Colonel By Drive
Ottawa, Ontario K1S 5B6
Canada
613-520-2600 x2630 (Phone)
613-520-2551 (Fax)

HOME PAGE: http://www.carleton.ca/winer

Carleton University - Department of Economics ( email )

1125 Colonel By Drive
Ottawa, Ontario K1S 5B6
Canada
613-520-2600 ex.2630 (Phone)
613-520-2551 (Fax)

HOME PAGE: http://www.carleton.ca/winer

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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