TITLE:
Trade, Pollution Transfers and Spillovers: Conditions for Welfare Outcomes
AUTHORS:
John Dogbey
KEYWORDS:
Welfare Effects; Spatially Separable; Trade; Substitutability; Pollutant; Transfers
JOURNAL NAME:
Theoretical Economics Letters,
Vol.4 No.1,
February
12,
2014
ABSTRACT: I use a model of
indirect utility and compensated demand functions to analyze conditions for
welfare effects when countries engage in trade involving a pollutant. The paper
questions whether there is a transfer problem in such a trade and what
conditions could set the stage for welfare effects. The results show that, countries’
(both trade partner’s and non-participants’) welfares increase not necessarily
with distance from the pollution generating location (country) but with their
marginal propensities to consume the good, substitutability in the good in
question, the type of good (normal, Giffen and or inferior) and the spatial
separability of the pollutant.