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  3. American Economic Review
  4. September 2001
  5. Is Free Trade Good for the Environment?

Is Free Trade Good for the Environment?

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Abstract

This paper investigates how openness to international goods markets affects pollution concentrations. We develop a theoretical model to divide trade's impact on pollution into scale, technique, and composition effects and then examine this theory using data on sulfur dioxide concentrations. We find international trade creates relatively small changes in pollution concentrations when it alters the composition of national output. Estimates of the trade-induced technique and scale effects imply a net reduction in pollution from these sources. Combining our estimates of all three effects yields a somewhat surprising conclusion: freer trade appears to be good for the environment.

Citation

Antweiler, Werner, Brian R. Copeland, and M. Scott Taylor. 2001. "Is Free Trade Good for the Environment?" American Economic Review, 91 (4): 877-908. DOI: 10.1257/aer.91.4.877

JEL Classification

  • F18 Trade and Environment
  • Q25 Renewable Resources and Conservation: Water