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AREC 869T—McAusland

Trade and the Environment

Spring 2009

Prof. Carol McAusland

2024 Symons Hall

(301) 4050-1288

cmcausland@arec.umd.edu

Lecture: Tuesdays and Thursday 9:30-10:45am

Office Hours: Thursdays, 11-11:50 am.

The required text for the course is

 Brian R Copeland and M. Scott Taylor. 2003. Trade and the Environment: Theory and Evidence. Princeton University Press: Princeton, NJ.

We will work through chapters 2-8 of this text, and then proceed to examine numerous papers from the literature.  Papers to be covered are identified by bold text in the Reading List.

Grading

Midterm (25%)

Final (25%)

Student Lecture (25%)

Research Proposal and Presentation in class. (25%)

The midterm and Final will take the usual closed book format.  The midterm will take1.5 hour, and the final 2 hours.  Exam dates: March 10, May 15.  Exams are not cumulative.  On each exam you are to answer only a subset of questions posed. 

Each student will present one lecture based on one of the following papers: Ederington and Minier (2003), Levinson (2007), Popp and Lovely (2008), Fredriksson (1999), Ederington (2001), Chichilnisky (1994), Copeland and Taylor (Forthcoming).  Students will email me their top four choices after the first meeting, and chapters will be assigned at the second meeting.

Each student will prepare a 15-20 page research proposal.  Each proposal will do/contain the following:

• Identify an NSF-worthy question in the broad field of trade and environment.

• Outline techniques for solving/answering the question.  If your question is empirical, describe the data sets and estimation techniques; if your question is theoretical, describe the model you would use.

• A literature review that places the proposed question in the context of the broader literature.  The literature review should be no more than 5 pages at most.

• At least one paragraph providing a clear statement of the policy relevance of this question; be sure to identify any stakeholders (aside from the NSF) who you think might be interested in funding such research. 

Proposals are due April 23; students will make a 30 minute presentation each of their proposals during the last two weeks of lecture. In your presentation, be sure to give an overview of the policy relevance of your proposed project and describe the methods you will use to answer your research question.  This is an opportunity to get feedback from your classmates and instructor, so be up front about problems you anticipate in executing your proposal. It  goes without saying that students should take all assignments seriously.  This is particularly true for this project.  In the past, some of these proposals have springboarded into successful funding proposals and publishable projects.  Treat this assignment as an opportunity for getting feedback on future dissertation topics, chapters and research agendas.  Students are advised to discuss their proposal topic with the instructor well in advance on the due date.

Reading List/Bibliography

Boldface: Required Reading

*AREC students: use your AREC username and password to access protected .pdfs

1. Competitive Models---Effects of Trade on the Environment

Antweiler, Werner, Brian R. Copeland and M. Scott Taylor. 2001. “Is Free Trade Good for the Environment?” American Economic Review 91(4): 877-908.

Chintrakarn, Pandej and Daniel Millimet. 2006. “The Environmental Consequences of Trade: Evidence from Subnational Trade Flows,” Journal of Environmental Economics and Management, 2006, 52, 430-453.

Chua, Swee. 2003. “Does tighter environmental policy lead to a comparative advantage in less polluting goods?” Oxford Economic Papers 55: 25-35.

Cole, Matthew A. and Robert J.R. Elliott. 2003. “Determining the trade-environment composition effect: the role of capital, labor and environmental regulations.” Journal of Environmental Economics and Management, 46(3): 363-383.

Cole, Matthew A. and Robert J. R. Elliott. 2005. “FDI and the Capital Intensity of ‘Dirty’ Sectors: A Missing Piece of the Pollution Haven Puzzle,” Review of Development Economics 9(4): 530–548.

Copeland, Brian and M. Scott Taylor. 1994. "North-South Trade and the Environment, " Quarterly Journal of Economics 109(3): 755-787.

Copeland, Brian and M. Scott Taylor. 1995. "Trade and Transboundary Pollution," American Economic Review 85(4): 716-737.

Copeland, Brian R. and M. Scott Taylor. 1995. “Trade and the Environment: A Partial Synthesis” American Journal of Agricultural Economics 77: 765-771.

Frankel, Jeffrey A. and Andrew K. Rose. 2005. “Is trade good or bad for the environment: Sorting out the causality,” Review of Economics and Statistics,

 Grossman G.M, and A. B. Krueger. 1993. "Environmental Impacts of a North American Free Trade Agreement," in P. Garber, ed., The US-Mexico Free Trade Agreement. Cambridge, MA: MIT Press.

Grossman G.M, and A. B. Krueger. 1995. "Economic Growth and the Environment," Quarterly Journal of Economics 353-377.

Pethig, R. “Pollution, Welfare, and Environmental Policy in the Theory of Comparative Advantage,” Journal of Environmental Economics and Management 2: 160-169.

Richelle, Yves. 1996. "Trade incidence on transboundary pollution:  Free trade can beneit the global environmental quality," University of Laval, Discussion paper no. 9616.

Rauscher, Michael. 1991.  "National environmental policies and the effects of economic integration, " European Journal of Political Economy 7: 313-329.

Rauscher, Michael. 1997. International Trade, Factor Movements, and the Environment. Oxford: Clarendon Press.

Siebert, Horst. 1979. “Environmental Policy in the Two-Country Case,” Zietschrift f¨ur National¨okonomie 39(3-4): 259-274.

2. Political Economy

Aidt, Toke. 1998. “Political internalization of economic externalities and environmental policy,” Journal of Public Economics 69: 1-16

Bommer, Rolf and Gunther G. Schulze. 1999. “Environmental improvement with trade liberalization,” European Journal of Political Economy 15: 639-661.

Conconi, Paolo. “Green and Producer Lobbies: Competition or Alliance?” in S. M. Murshed (ed.), Issues in Positive Political Economy London, U.K. and New York, N.Y.: Routledge Publishers, July 2002.

Conconi, Paolo. “Green Lobbies and Transboundary Pollution in Large Open Economies”  Journal of International Economics, Volume 59, Issue 2, March 2003, Pages 399-422.

Damania, Richard, Per G. Fredriksson and John A. List. 2003. “Trade Liberalization, Corruption, and Environmental Policy Formation: Theory and Evidence” Journal of Environmental Economics and Management 46(3): 490-512.

Eliste, Paavo and Per G.

. 2002. “Environmental regulations, transfers, and trade: Theory and evidence,” Journal of Environmental Economics and Management 43(2): 234-250.

Fredriksson, Per. 1997. “The Political Economy of Pollution Taxes in a Small Open Economy,” Journal of Environmental Economics and Management 33: 44-58.

Fredriksson, P.G., Gaston, N., 1999. “The ‘greening’ of trade unions and the demand for eco-taxes.” European Journal of Political Economy 15, 663–686.

Fredriksson, Per and Daniel L. Millimet. “Comparative Politics and Environmental Taxation,” Journal of Environmental Economics and Management 48(1), 2004, pp. 705-22. 

Fredriksson, Per, John A. List, Daniel L. Millimet and W. Warren McHone. 2003. “Effects of Environmental Regulations on Manufacturing Plant Births: Evidence from a Propensity Score Matching Estimator,” Review of Economics and Statistics 85(4), 2003, pp. 944-52).

Fredriksson, Per and Richard Damania. 2003. “Trade Reform, Endogenous Lobby Group Formation, and Environmental Policy,” Journal of Economic Behavior and Organization 52(1), 2003, pp. 47-69.

Gulati, Sumeet. 2003. “The effect of choosing free trade on pollution policy and welfare,” mimeo, University of British Columbia.

Gulati, Sumeet and Devesh Roy (forthcoming) “How Standards Drive Taxes? The Political Economy of Tailpipe Pollution.” Topics in Economic Analysis and Policy, Berkeley Electronic Press.

Gulati, Sumeet and Devesh Roy, (November 2006) "Free Trade and the Greening of Domestic Industry,” Food and Resource Economics Working Paper, University of British Columbia.

Gulati, Sumeet (June 2006), “Free Trade and the Burden of Domestic Policy, ” Mimeo, University of British Columbia.

Leidy, M.P. and B.M. Hoekman. 1993. “‘Cleaning up’ while cleaning up? Pollution abatement, interest groups, and contingent trade policies,” Public Choice 78: 241-258.

McAusland, Carol. 2003. "Voting for Pollution Policy:  The Importance of Income Inequality and Openness to Trade" Journal of International Economics, 61(2): 425-451.

McAusland, Carol. 2005. "Harmonizing Tailpipe Policy in Symmetric Countries: Improve the Environment, Improve Welfare?" Journal of Environmental Economics and Management 50(2): 229-251

McAusland, Carol. 2008. "Trade, Politics, and the Environment: Tailpipe vs. Smokestack" Journal of Environmental Economics and Management 55(1): 52-71.

Schleich, Joachim. 1999. “Environmental Quality with Endogenous Domestic and Trade Policies,” European Journal of Political Economy 15: 53-71.

Schleich, Joachim and David Orden. 2000. “Environmental Quality and Industry Protection with Noncooperative Versus Cooperative Domestic Trade Policies,” Review of International Economics 8: 681-697.

Schulze, Gunther G. and Heinrich W. Ursprung, eds. 2001. International Environmental Economics: A survey of the issues. Oxford University Press: Oxford. Chapter 4.

Sturm, Daniel. "Product Standards, Trade Disputes, and Protectionism," Canadian Journal of Economics, 39(2), May 2006, 564 - 581

3. Pollution Haven Hypothesis and & Effects

Beata Smarzynska Javorcik and Shang-Jin Wei. 2004. “Pollution Havens and Foreign Direct Investment: Dirty Secret or Popular Myth?” Contributions to Economic Analysis & Policy 3(2).

Becker, Randy A. 2004. “Pollution Abatement Expenditure by U.S. Manufacturing Plants: Do Community Characteristics Matter?” Contributions to Economic Analysis & Policy 3(2).

Birdsall, Nancy and David Wheeler. 1992.  "Trade policy and industrial pollution in Latin America:  Where are the pollution havens?" in Patrick Low, ed., International Trade and the Environment.  Washington, DC:  World Bank.

Brunnermeier, Smita B. and Arik Levinson. 2004. “Examining the Evidence on Environmental Regulations and Industry Location.” Journal of Economic Development, 13(1): 6-41.

Copeland, Brian R. and M. Scott Taylor. 2004. “Trade, Growth, and the Environment” Journal of Economic Literature 42(1): 7-71.

Dean, Judith M. 2002. “Does Trade Liberalization Harm the Environment? A New Test” The Canadian Journal of Economics, 35(4):819-842

Di Maria, Corrado and Sjak A. Smulders. 2004. “Trade Pessimists vs Technology Optimists: Induced Technical Change and Pollution Havens” Advances in Economic Analysis & Policy 4(2).

Duffy-Deno, Kevin T. 1992.  "Pollution abatement expenditures and regional manufacturing activity," Journal of Regional Science 32(4): 419-436.

Ederington, J., and Minier, J. 2003. “Is environmental policy a secondary trade barrier? An empirical analysis.” Canadian Journal of Economics, 36(1):137-154.

Ederington, Josh, Arik Levinson and Jenny Minier. 2005. “Footloose and Pollution-Free,” Review of Economics and Statistics 87: 92-99.

Ederington, Josh, Arik Levinson, and Jenny Minier. 2004. “Trade Liberalization and Pollution Havens” Advances in Economic Analysis & Policy 4(2)

Elbers, Chris and Cees Withagen. 2004. "Environmental Policy, Population Dynamics and Agglomeration” Contributions to Economic Analysis & Policy 3(2).

Eskeland, Gunnar S. and Ann E. Harrison. 2003. “Moving to Greener Pastures? Multinationals and the Pollution Haven Hypothesis,” Journal of Development Economics. 70(1):1-23.

Fredriksson, Per G. and Muthukumara Mani. 2004. “Trade Integration and Political Turbulence: Environmental Policy Consequences Advances in Economic Analysis & Policy 4(2)

Hanna, Rema. “U.S. Environmental Regulation and FDI: Evidence from a Panel of U.S. Based Multinational Firms,” NYU Development Research Institute Working Paper #23

Henderson, Daniel J. and Daniel Millimet. “Pollution Abatement Costs and Foreign Direct Investment Inflows to U.S. States: A NonparametricReassessment,” Review of Economics and Statistics, forthcoming.

Hultberg, Patrik T. and Edward B. Barbier. 2004. “Cross-Country Policy Harmonization with Rent-Seeking” Contributions to Economic Analysis & Policy 3(2).

Kahn, Matthew E.and Yutaka Yoshino. 2004. “Testing for Pollution Havens Inside and Outside of Regional Trading Blocs” Advances in Economic Analysis & Policy 4(2)

Levinson, Arik. 1997.  "Environmental Regulations and Industry Location:  International and Domestic Evidence," in Jagdish Bhagwati and Robert E. Hudec, eds., Fair Trade and Harmonization:  Prerequisites for Free Trade? Vol. 1.  Cambridge, Ma:  MIT Press.

Levinson, Arik. 1999.  "State Taxes and Interstate Hazardous Waste Shipments," American Economic Review 89(3): 666-677.

Levinson, Arik and M. Scott Taylor. 2008. "Unmasking the Pollution Haven Effect," International Economic Review, 49(1), 223-254..

Levinson, Arik. 2007. "Technology, International Trade and Pollution from U.S. Manufacturing," NBER WP 13616 (forthcoming AER).

List, John A., Daniel L. Millimet, and Warren McHone. 2004. “The Unintended Disincentive in the Clean Air Act”  Advances in Economic Analysis & Policy 4(2)

List, John A. and Daniel Millimet. 2004. “The Case of the Missing Pollution Haven Hypothesis,” Journal of Regulatory Economics, 2004, 26, 239-262.

List, John A., W. Warren McHone and Daniel Millimet. 2004. “Effects of Environmental Regulation on Foreign and Domestic Plant Births: Is There a Home Field Advantage?,”. Journal of Urban Economics, 2004, 56, 303-326.

Low, Patrick and Alexander Yeats.  1992.  "Do 'dirty' industries migrate?" in Patrick Low, ed., International Trade and the Environment.  Washington, DC:  World Bank. 

Low, Patrick. 1992.  "Trade measures and environmental qulaity:  The implications for Mexico's exports," in Patrick Low, ed., International Trade and the Environment.  Washington, DC:  World Bank.

Lucas, Robert E.B., David Wheelr and Hemamala Hettige.  1992.  "Economic development, environmental regulation and the international migration of toxic industrial pollution, 1960-1988," in Patrick Low, ed., International Trade and the Environment.  Washington, DC:  World Bank.

Markusen, James, Edward Morey and Nancy Olewiler. 1995.  "Competition in Regional Environmetnal Policies When Plant Locations are Endogenous," Journal of Public Economics 56: 55-77.

McAusland, Carol. 2002. "Cross-Hauling of Polluting Factors." Journal of Environmental Economics and Management 44(3) 2002: 448-470.

McAusland, Carol. 2004. “Environmental Regulation as Export Promotion: Product Standards for Dirty Intermediate Goods” Contributions to Economic Analysis & Policy 3(2).

Mulatu, Abay, Raymond J.G.M. Florax, and Cees Withagen . 2004. “Environmental Regulation and International Trade: Empirical Results for Germany, the Netherlands and the US, 1977-1992” Contributions to Economic Analysis & Policy 3(2).

Popp, David and Mary Lovely. 2008. "Trade, Technology, and the Environment: Why Have Poor Countries Regulated Sooner?" NBER Working Paper 14286

Regibeau, Pierre M. and Alberto Gallegos. 2004. “Managed Trade, Trade Liberalisation and Local Pollution” Advances in Economic Analysis & Policy 4(2).

Sigman, Hilary.2004. “Does Trade Promote Environmental Coordination?: Pollution in International Rivers” Contributions to Economic Analysis & Policy 3(2).

Wilson, John Douglas. 1997.  "Capital Mobility and Environmental Standards:  Is There a Theoretical Basis for a Race to the Bottom?" in Jagdish Bhagwati and Robert E. Hudec, eds., Fair Trade and Harmonization:  Prerequisites for Free Trade? Vol. 1.  Cambridge, Ma:  MIT Press.

Wu, Xiaodong. 2004. “Pollution Havens and the Regulation of Multinationals with Asymmetric Information” Contributions to Economic Analysis & Policy 3(2).

Y. Onuma, Zhihao Yu and L. Zhao. 2005. "A Theory of Mutual Migration of Polluting Firms”, Canadian Journal of Economics  38(3): 900-918.

4. Trade and Resources

Brander, James A. and M. Scott Taylor. 1998. “Open-Access Renewable Resources: Trade and Trade Policy in a two-country model,” Journal of International Economics, 44, 1998, 181-209.

Brander, James A. and M. Scott Taylor. 1997. “International Trade between Consumer and Conservationist Countries,” Resource and Energy Economics, Vol. 19, No. 4, November 1997, 267-298

Brander, James A. and M. Scott Taylor. 1997. International Trade and Open-Access Renewable Resources: the Small Open Economy Case, Canadian Journal of Economics, August, 1997, 527-552.

Chilchilnisky, Graciela. 1994. "North-South Trade and the Global Environment," American Economic Review 84(4): 851-874.

Copeland, Brian R. and M. Scott Taylor. "Trade, Tragedy and the Commons" mimeo.

Costello, Christopher and Carol McAusland. 2003. "Protectionism, Trade, and Measures of Damage from Exotic Species Introductions" American Journal of Agricultural Economics, 85(4) 2003: 964-975.

Costello, Christopher, Mike Springborn, Carol McAusland and Andy Solow. 2006. "Unintended biological invasions: Does risk vary by trading partner?" Journal of Environmental Economics and Management 54(3) 2007: 262-276.

Eliasson, L and S.J. Turnovsky. 2004. “Renewable resources in an endogenously growing economy: Balanced growth and transitional dynamics,” Journal of Environmental Economics and Management, XXX

Emami, Ali and Richard S Johnston (2000) “Unilateral Resource Management in a Two-Country General Equilibrium Model of Trade in a Renewable Fishery Resource” American Journal of Agricultural Economics 82 (1), 161–172.

Ferreira, S. 2004. “Deforestation, property rights, and international trade”. Land Economics, XXX

López, E. Ramon, G Anríquez, and Sumeet Gulati. “Sustainability with Unbalanced Growth: The Role of Structural Change” Journal of Environmental Economics and Management (forthcoming)

McAusland. Carol. 2005. "Learning By Doing in the Presence of an Open Access Renewable Resource: Is Growth Sustainable?" Natural Resource Modeling 18(1) 2005: 41-68.

McAusland, Carol and Christopher Costello. 2004. "Avoiding Invasives: Trade-related policies for controlling unintentional exotic species introductions" Journal of Environmental Economcs and Management 48(2): 954-977.

Polasky, Steve, Christopher Costello, and Carol McAusland. "On Trade, Land-use, and Biodiversity" Journal of Environmental Economics and Management 48(2) 2004: 911-925.

Smulders, Sjak. Daan van Soest, Cees Withagen. 2004. “International trade, species diversity, and habitat conservation” Journal of Environmental Economics and Management, 2004, XXX

Taylor, M. Scott. 2006. "Buffalo Hunt: International Trade and the Virtual Extinction of the North American Bison", mimeo.

Bulte, Erwin H. and Richard Damania.  2005. “A note on trade liberalization and common pool resources” Canadian Journal of Economics XXX

5. Terms of Trade (Optimal tariffs, Leakage)

Broda, Christian, Nuno Limao and David Weinstein. "Optimal Tariffs: The Evidence," American Economic Review (forthcoming).

Felder, Stefan and Thomas J. Rutherford. 1993. "Unilateral CO2 Reductions and Carbon Leakage: The Consequences of International Trade in Oil and Basic Materials.” Journal of Environmental Economics and Management  25(2): 162-76.

Frankel, Jeffrey. 2008. "Addressing the Leakage/Competitiveness Issue in Climate Change Policy Proposals," Brookings.

Golombek, Rolf and Michael Hoel. 2004.”Unilateral Emission Reductions and Cross-Country Technology Spillovers” Advances in Economic Analysis & Policy 4(2).

Krutilla, Kerry. 1991. “Environmental Regulation in an Open Economy”
Journal of Environmental Economics and Management 20(2): 127-42.

Markusen, James R. 1975. "International externalities and optimal tax structures," Journal of International Economics 5: 15-29.

 6. “Strategic” Environmental Policy

Barrett, Scott. 1994. "Strategic Environmental Policy and International Trade," Journal of Public Economics 54(2): 325-328.

Kennedy, Peter W. 1994. “Equilibrium Pollution Taxes in Open Economies with Imperfect Competition,” Journal of Environmental Economics and Management 27(1): 49-63.

Rauscher, M. 1994.  "On Ecological Dumping," Oxford Economic Papers 46: 822-840.

Walz, U. and D. Wellisch. 1997.  "Is Free Trade in the Interest of Exporting Countries When There is Ecological Dumping," Journal of Public Economics 66: 275-291.

7. International Agreements/Linkages

Aisbett, Emma, Larry Karp and Carol McAusland. 2007. "Police-powers, regulatory takings and the efficient compensation of domestic and foreign investors." Mimeo.

Copeland, Brian R. 2000. "Trade and Environment: Policy Linkages," Environment and Development Economics, 5: 405-432

Ederington, Josh. 2001. “International Coordination of Trade and Domestic Policies.” American Economic Review 91(5): 1580-93.

Barrett, Scott. 1994. “Self-Enforcing International Environmental Agreements” Oxford Economic Papers 46(0): 878-94.

Congleton, Roger. 2001. “Governing the global environmental commons: The Political Economy of International Environmental Treaties and Institutions,” in Schulze, Gunther G. and Heinrich W. Ursprung, eds. 2001. International Environmental Economics: A survey of the issues. Oxford University Press: Oxford. Chapter 11.

Copeland, Brian R. 1994. "International Trade and the Environment: Policy Reform in a Polluted Small Open Economy", Journal of Environmental Economics and Management 26: 44-65.

Limao, Nuno “Trade Policy, Cross-border Externalities and Lobbies: Do Linked Agreements Enforce More Cooperative Outcomes?” Journal of International Economics, sep. 2005, 67(1), p. 175-199.

8. Intra-Industry Trade & Agglomeration

Copeland, Brian R. and M. Scott Taylor. 1999. “Trade, Spatial Separation, and the Environment” Journal of International Economics 47(1): 137-68.

Elbers, Chris and Cees Withagen. 2004. "Environmental Policy, Population Dynamics and Agglomeration” XXX

McAusland, Carol and Daniel Millimet. 2009. "Destination Matters: The Impact of Inter-Country versus Intra-Country Trade on the Environment"

Rauscher, Michael. 1997. International trade, factor movements, and the environment. Oxford University Press:  Oxford. Chapter 6.6

9. Environmental Federalism

Hoel, Michael and Perry  Shapiro. 2003. "Population mobility and transboundary environmental Problems,” Journal of Public Economics 87 (2003) 1013–1024

Hoel, Michael and Perry  Shapiro. 2004. “Transboundary Environmental Problems with Mobile but Heterogeneous Populations,” Environmental and Resource Economics; 27: 265-271.

Markusen, James R. 1975b. "Cooperative control of international pollution and common property resources," Quarterly Journal of Economics 89: 618-632.

Oates, Wallace and Robert M. Schwab. 1988.  "Economic Competition Among Jurisdictions:  Efficiency Enhancing or Distortion Inducing?" Journal of Public Economics 35: 333-354.

Approximate Calendar of Lectures

JANUARY 2009

FEBRUARY 2009

MARCH 2009

APRIL 2009

MAY 2008

This page last edited May 7, 2009.

Responding to referee reports.