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Three essays on international trade, political economy and environmental policy

University of British Columbia

This dissertation contains three papers that contribute to the theory of international trade, political economy, and trade and environmental protection. The first paper develops a model to examine the costs and benefits of trade in differentiated products. It focuses on how relative ability in exporting variety between two countries determines economic welfare in both countries. The results shed light on the question of why export-promotion programs in many countries aim not only to help their existing exporting firms export more, but also to help domestic firms become new exporting firms or enter new foreign markets. The paper also discusses the possibility of over-provision of export variety and raises some questions regarding the benefits of trade in differentiated products. The second paper suggests some coherent explanations for tariff reductions and substitution of non-tariff barriers for tariffs, taking into account both organized special interests and unorganized consumer interests. It focuses on how the presence of informed consumers affects the political equilibrium choice of trade policy - both the level of protection and the policy instrument. The paper identifies three effects that interact with each other as an incumbent government substitutes a NTB for a tariff and finds, among other things, that an increase in foreign competition will not cause the government to substitute NTBs for tariffs but a rise in the government's valuation of political contributions might. The third paper shows that small or financially constrained environmentalist groups can compete indirectly through changing public preferences over environmental quality, though they may be in a weak position relative to polluting industries in the direct competition for political influence. It is also shown, however, that in a small open economy where the output price is exogenously determined, the value of domestic persuasion falls and government environmental policies will be determined by direct political competition. Moreover, direct competition for political influence in the open economy becomes more intense because positions of different groups on environmental policy become more extreme. The analysis also shows that moving to free trade would increase a country's environmental protection as long as the median voter were not very 'green'.

Thesis/Dissertation

application/pdf

2009-07-02

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http://hdl.handle.net/2429/9913

Economics

University of British Columbia

UBCV

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