Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/226271 
Authors: 
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8569
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
Free trade can often lead to resource depletion, such as deforestation in the tropics. This paper first presents a dynamic model whereby the South (S) depletes to export the extracted units (timber) or the produce (beef) from land available after depletion. Because of the damages, the North benefits from trade liberalization only if the remaining stock is, in any case, diminished. For that reason, S speeds up exploitation. The negative results are reversed if the parties can negotiate a contingent trade agreement, whereby the allocation of gains from trade, and thus the location on the Pareto frontier, is sensitive to the size of the remaining stock. In equilibrium, S conserves to maintain its favorable terms of trade, S conserves more than in autarky, and more when the gains from trade are large. The parties cannot commit to future policies, but they obtain the same outcome as if they could.
Subjects: 
exhaustible resources
deforestation
international trade
trade agreements
environmental conservation
conservation goods
renegotiation
JEL: 
F18
F13
F55
Q56
Q37
Document Type: 
Working Paper
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