Hatzipanayotou, Panos Lahiri, Sajal Michael, Michael S.
Year of Publication:
CESifo Working Paper No. 1479
We construct a two-good general equilibrium model of international trade for two small open economies where pollution from production is transmitted across borders. Governments in both countries impose emission taxes non-cooperatively. Within this framework, we examine the effect of trade liberalization and of changes in the perception of cross-border pollution on Nash emission taxes, emission levels, and welfare.
cross-border pollution emission taxes terms of trade globalization welfare