[Econmaster2012] Research Seminar in Economics, June 1: Jim Markusen

[Frank Stähler]

Dear all,

We could win Jim Markusen for the next Research Seminar in Economics. 
Since Jim cannot spend too much time at Tübingen, his seminar will take 
place on Monday (June 1) at 4.15 pm in room E09 in Mohlstraße 36. He 
will present

"An Alternative Base Case for Modeling Trade and the Environment".

You find an abstract of his paper below.

You find the program and paper links of the RSE under
http://www.wiwi.uni-tuebingen.de/forschung0/research-seminars/research-seminar-in-economics.html.

I am looking forward to seeing you on Monday late afternoon.

Best wishes,
Frank Stähler


Abstract:

The trade-and-environment literature often begins with a generic base 
case. Sectors differ in pollution intensities and countries have 
sectoral comparative advantage. Pollution comes from production, not 
consumption, and consumers have identical, homothetic preferences over 
goods and environmental quality. Policy instruments are Pigouvian taxes 
and tariffs. I argue that this model is counter-empirical in some ways 
and assumes away other crucial features. I offer a simple alternative 
base case, in which global pollution is proportional to all economic 
activity, and where environmental quality has an income elasticity of 
demand exceeding one. An income tax can fund an abatement activity, 
diverting resource from production and creating a terms-of-trade 
externality that passes some costs of abatement to the other country. I 
contrast cooperative and non-cooperative outcomes between governments of 
two countries differing in per-capita incomes. Free trade is good for 
the environment because (a) gains from trade increase resources devoted 
to abatement and (b) countries can pass more of their abatement costs to 
the other country in the non-cooperative case. Leakage takes a very 
different form called “policy leakage” and border taxes are 
counter-productive. When per-capita income differences are large, a poor 
country may be worse off when the large country abates (reversing the 
usual argument on free riding) and cooperative bargaining over abatement 
levels may offer no gains. Finally, I examine “issue linking” in 
bargaining when one country is both large and rich, and hence has both a 
high tariff and a high abatement effort in a non-cooperative equilibrium.


-- 

Frank Stähler
Professor of Economics
The University of Tübingen
frank.staehler at uni-tuebingen.de

Coordinator Doctoral Program in Economics (DPE)
http://www.uni-tuebingen.de/de/41162

Adjunct Professor of Economics
School of Economics
The University of Adelaide
frank.staehler at adelaide.edu.au

http://www.frank-staehler.de