Environmental Impacts of a North American Free Trade Agreement

57 Pages Posted: 22 Jul 2000 Last revised: 17 Apr 2014

See all articles by Gene M. Grossman

Gene M. Grossman

Princeton University - Woodrow Wilson School of Public and International Affairs; Princeton University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Alan B. Krueger

Princeton University - Industrial Relations Section; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Date Written: November 1991

Abstract

A reduction in trade barriers generally will affect the environment by expanding the scale of economic activity, by altering the composition of economic activity, and by bringing about a change in the techniques of production. We present empirical evidence to assess the relative magnitudes of these three effects as they apply to further trade liberalization in Mexico. In Section 1. we use comparable measures of three air pollutants in a cross-section of urban areas located in 42 countries to study the relationship between air quality and economic growth. We find for two pollutants (sulfur dioxide and "smoke") that concentrations increase with per capita GDP at low levels of national income, but decrease with GD? growth at higher levels of income. Section 2 studies the determinants of the industry pattern of U.S. imports from Mexico and of value added by Mexico's maquiladora sector. We investigate whether the size of pollution abatement costs in the U.S. industry influences the pattern of international trade and investment. Finally, in Section 3, we use the results from a computable general equilibrium model to study the likely compositional effect of a NAFTA on pollution in Mexico.

Suggested Citation

Grossman, Gene M. and Krueger, Alan B., Environmental Impacts of a North American Free Trade Agreement (November 1991). NBER Working Paper No. w3914. Available at SSRN: https://ssrn.com/abstract=232073

Gene M. Grossman (Contact Author)

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

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CESifo (Center for Economic Studies and Ifo Institute) ( email )

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National Bureau of Economic Research (NBER)

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Alan B. Krueger

Princeton University - Industrial Relations Section ( email )

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National Bureau of Economic Research (NBER)

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United States

IZA Institute of Labor Economics

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Germany

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