The Effects of Unilateral Environmental Regulations in a World with Capital Mobility and Trading Costs

Our paper discusses the management of global pollution issues in a North-South economic geography model with capital mobility and trading costs. We first show that a unilateral environmental policy adopted by the developed country drives the industrial firms out of the region and lowers real income....

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Bibliographic Details
Published in:Asia-Pacific journal of accounting & economics 2009-12, Vol.16 (3), p.317-338
Main Authors: Rieber, Arsène, Tran, Thi Anh-Dao
Format: Article
Language:English
Subjects:
Consumer goods
Dumping
ecological dumping
economic georagphy
Environmental impact
Environmental policy
Globalization
international environmental issues
Monopolistic competition
North-South
Quantitative Finance
Real income
Studies
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Summary:Our paper discusses the management of global pollution issues in a North-South economic geography model with capital mobility and trading costs. We first show that a unilateral environmental policy adopted by the developed country drives the industrial firms out of the region and lowers real income. However, the ecological dumping argument has only found partial theoretical support as the Northern larger market still attracts firms. More importantly, the total effect on the environment appears ambiguous: due to multiple interactions at work, globalization can make pollution even worse. These outcomes provide arguments for international cooperation. However, although efficient in reducing global pollution, this second option hurts the South both in terms of industrial relocation and real income.
ISSN:1608-1625
2164-2257
DOI:10.1080/16081625.2009.9720846