Environmental Policy And Firm Relocation: The Case Of U.S.-Mexico

The paper studies the effect of stringent environmental policy on domestic firms' location decisions, especially in the context of a bilateral trade agreement. The main variables included are market size, trade barriers, and fixed costs of establishing abroad. The results show that parameter assumption in the inverse demand function matter. In addition, changes in model variables yield both intuitive and some less intuitive results. For example, predictions on firm movement following economic integration are not as clear as might be expected. The results are discussed in the context of U.S.-Mexico economic integration.

Cross-country catch-up in the manufacturing sector: Impacts of heterogeneity on convergence and technology adoption

Abstract This paper analyses econometrically the relationship between productivity growth in manufacturing and technology transfer from the leading economy. The recent convergence literature identifies two processes required for convergence; nations must both attain comparable levels of factor intensity and similar levels of technology. Homogeneity in technologies has neither theoretical nor empirical support. The paper focuses on the manufacturing sector and its two-digit industries while allowing for heterogeneity in technology and in the rate of catch-up. It compares catch-up rates and productivity estimates across manufacturing sectors and GDP and discusses possible sources for the obtained differences. The empirical part of the paper explores the validity of our econometric model for 16 OECD countries for aggregate and manufacturing labor productivity. Our results indicate that aggregate studies bias downward the estimated convergence rates. The rates of catch-up, as well as levels of productivity and sources of its growth in terms of technology and efficiency growth, also differ across countries. Finally, it finds that institutional factors such as bureaucratic efficiency are important determinants of catch-up rates

Trade Openness, Economic Growth, and Environmental Degradation in Asian Developing Countries

This paper examines the effects of trade openness and economic growth on CO2 emission using a theoretical trade model. The theoretical results indicate that an increase in trade openness intensifies environmental degradation, while an increase in imports may result in advancement of technology that has positive effect on environmental quality, implying a possible existence of the Environmental Kuznets Curve (EKC). This paper explores these findings using panel data framework based on annual data from Asian developing countries (1986-2013). The empirical results show that trade openness and economic growth intensify CO2 emission. However, the results do not validate the EKC

Coordinating Environmental and Trade Policy to Protect the Environment: A Pedagogical Approach

Establishing appropriate environmental and trade policies is an important issue in today’s globalized economy, and yet there is no comprehensive analysis in most environmental economics and international trade undergraduate textbooks of how such policies are interrelated. The purpose of this article is to provide a straightforward framework for teaching students how environmental and trade policies are indeed interconnected, utilizing the standard tools of intermediate microeconomics. Focusing on a single competitive market and (nonstrategic) welfare maximizing government, optimal environmental and trade policies are derived and explored. The framework is used to address several circumstances, including negative production and consumption externalities, small and large countries, and transboundary pollution

Cross-Country Policy Harmonization with Rent-Seeking

In a reciprocal market model with imperfectly competitive firms, domestic policies will differ across countries that are economically and politically diverse. We explore the implications of this standard result with regard to harmonization of environmental policies between corrupt and non-corrupt countries. Imposing a more stringent policy on a non-corrupt government will be welfare reducing to the receiving country, but may be welfare enhancing for the imposing country. However, where environmental standards are under the control of a corrupt government, it is possible that harmonization is welfare enhancing to both countries.