Abstract
This paper analyzes the impact of vertical linkages on the international effects of environmental policy. With vertical linkages, stricter environmental policy at home indirectly reduces pollution in the rest of the world. This spillback effect can reinforce the free-rider problem that arises under strategic interaction. When pollution is transboundary a race to the bottom ensues, despite the fact that vertical linkages make it easier for national regulators to export the costs of environmental policy via the terms of trade. We also find that while trade liberalization can be good for the environment, vertical linkages tend to increase global pollution.
| Original language | English |
|---|---|
| Pages (from-to) | 115-128 |
| Number of pages | 14 |
| Journal | Journal of International Economics |
| Volume | 95 |
| Issue number | 1 |
| Early online date | 6 Nov 2014 |
| DOIs | |
| Publication status | Published - Jan 2015 |
Keywords
- Globalization
- trade and environment
- carbon leaking
- climate policy
- input-output
Access to Document
- Bogmans_Can_terms_trade_externality_Journal_International_Economics_2014
NOTICE: this is the author’s version of a work that was accepted for publication in Journal of International Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of International Economics, Volume 95, Issue 1, January 2015, DOI: 10.1016/j.jinteco.2014.10.006. Eligibility for repository checked February 2015