Renewable Resources as a Factor of Production in International Trade
Renewable Resources as a Factor of Production in International Trade
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Date
2005-11-04
Authors
Anriquez Nilson, Gustavo Adolfo
Advisor
Lopez, Ramon E
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Abstract
This work provides an extensive review of the literature on trade and environmental
issues that has been growing since the early 1990s. The gaps in this literature are
identified and generalizations are provided from results that are scattered.
Next, we contribute to this literature by studying a Ricardian model of trade,
in which one of the sectors uses a renewable resource as a factor of production. The
contribution lies in the study of trade and welfare through the full horizon of the
welfare maximization problem, not relying in equilibrium analysis.
This study is divided into small country case and a 2 country - 2 factor model.
In the first case, we show how trade prevents extinction, and if the assumption of full
open access environmental externality is relaxed the welfare expected results change
substantially. In the 2 x 2 model we show that equilibrium is actually not possible
invalidating many such analyses existing in the literature. This lack of equilibrium
may lead the country that is free from environmental externalities to actually lose
with trade vis-à-vis autarky.