The conservation effects of trade with imperfect competition and biased policymakers

Qianqian Shao*, Thorsten Janus, Maarten J. Punt, Justus Wesseler

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

In this paper, we study the effects of international trade on forest conservation and welfare in a two-country model with industry-biased policymakers and Cournot-competing firms. We find that opening up to trade increases the harvest taxes that the industry-biased governments impose compared to the autarky taxes. The tax increase is large enough to decrease the production levels, which leads to higher conservation levels. In addition, the numerical simulation predicts that increasing the industry-bias monotonically increases (i) the positive tax effect, (ii) the positive conservation effect, and (iii) the welfare gains from trade. The intuition behind the results is that industry-biased governments already degrade the environment under autarky, so even a highly-distorted trade outcome can be welfare-improving. We conclude that, even if industry bias decreases conservation, it does not have to increase the environmental costs of trade.

Original languageEnglish
Article number108
JournalAgriculture (Switzerland)
Volume8
Issue number7
DOIs
Publication statusPublished - 5 Jul 2018

Fingerprint

imperfect competition
taxes
Industry
Taxes
industry
Intuition
international trade
Costs and Cost Analysis

Keywords

  • Environmental conservation
  • International trade
  • Race to the bottom
  • Race to the top
  • Reciprocal dumping

Cite this

@article{8c1bf63454f142fc93d3529fc2ba70c0,
title = "The conservation effects of trade with imperfect competition and biased policymakers",
abstract = "In this paper, we study the effects of international trade on forest conservation and welfare in a two-country model with industry-biased policymakers and Cournot-competing firms. We find that opening up to trade increases the harvest taxes that the industry-biased governments impose compared to the autarky taxes. The tax increase is large enough to decrease the production levels, which leads to higher conservation levels. In addition, the numerical simulation predicts that increasing the industry-bias monotonically increases (i) the positive tax effect, (ii) the positive conservation effect, and (iii) the welfare gains from trade. The intuition behind the results is that industry-biased governments already degrade the environment under autarky, so even a highly-distorted trade outcome can be welfare-improving. We conclude that, even if industry bias decreases conservation, it does not have to increase the environmental costs of trade.",
keywords = "Environmental conservation, International trade, Race to the bottom, Race to the top, Reciprocal dumping",
author = "Qianqian Shao and Thorsten Janus and Punt, {Maarten J.} and Justus Wesseler",
year = "2018",
month = "7",
day = "5",
doi = "10.3390/agriculture8070108",
language = "English",
volume = "8",
journal = "Agriculture",
issn = "2077-0472",
publisher = "Multidisciplinary Digital Publishing Institute (MDPI)",
number = "7",

}

The conservation effects of trade with imperfect competition and biased policymakers. / Shao, Qianqian; Janus, Thorsten; Punt, Maarten J.; Wesseler, Justus.

In: Agriculture (Switzerland), Vol. 8, No. 7, 108, 05.07.2018.

Research output: Contribution to journalArticleAcademicpeer-review

TY - JOUR

T1 - The conservation effects of trade with imperfect competition and biased policymakers

AU - Shao, Qianqian

AU - Janus, Thorsten

AU - Punt, Maarten J.

AU - Wesseler, Justus

PY - 2018/7/5

Y1 - 2018/7/5

N2 - In this paper, we study the effects of international trade on forest conservation and welfare in a two-country model with industry-biased policymakers and Cournot-competing firms. We find that opening up to trade increases the harvest taxes that the industry-biased governments impose compared to the autarky taxes. The tax increase is large enough to decrease the production levels, which leads to higher conservation levels. In addition, the numerical simulation predicts that increasing the industry-bias monotonically increases (i) the positive tax effect, (ii) the positive conservation effect, and (iii) the welfare gains from trade. The intuition behind the results is that industry-biased governments already degrade the environment under autarky, so even a highly-distorted trade outcome can be welfare-improving. We conclude that, even if industry bias decreases conservation, it does not have to increase the environmental costs of trade.

AB - In this paper, we study the effects of international trade on forest conservation and welfare in a two-country model with industry-biased policymakers and Cournot-competing firms. We find that opening up to trade increases the harvest taxes that the industry-biased governments impose compared to the autarky taxes. The tax increase is large enough to decrease the production levels, which leads to higher conservation levels. In addition, the numerical simulation predicts that increasing the industry-bias monotonically increases (i) the positive tax effect, (ii) the positive conservation effect, and (iii) the welfare gains from trade. The intuition behind the results is that industry-biased governments already degrade the environment under autarky, so even a highly-distorted trade outcome can be welfare-improving. We conclude that, even if industry bias decreases conservation, it does not have to increase the environmental costs of trade.

KW - Environmental conservation

KW - International trade

KW - Race to the bottom

KW - Race to the top

KW - Reciprocal dumping

U2 - 10.3390/agriculture8070108

DO - 10.3390/agriculture8070108

M3 - Article

VL - 8

JO - Agriculture

JF - Agriculture

SN - 2077-0472

IS - 7

M1 - 108

ER -