The author is grateful to Patrick J. Conway, William Pizer, William Darity Jr., two anonymous referees and colleagues at the seminar at Oklahoma State University for helpful comments on an earlier draft.
Input Intensity: A Missing Link between Production, Trade Patterns, and Environmental Standards
Article first published online: 16 JAN 2012
© 2012 Blackwell Publishing Ltd
Review of International Economics
Volume 20, Issue 1, pages 108–118, February 2012
How to Cite
Lahiri, B. (2012), Input Intensity: A Missing Link between Production, Trade Patterns, and Environmental Standards. Review of International Economics, 20: 108–118. doi: 10.1111/j.1467-9396.2011.01011.x
- Issue published online: 16 JAN 2012
- Article first published online: 16 JAN 2012
Trade and production implications of a change in environmental policy using the 2 × 2 Heckscher–Ohlin framework are identified. For otherwise identical economies a difference of environmental policy standards generates two effects: the “effective-endowment effect” where the abatement activity uses up some resources of the economy leaving less for the production of the final goods and the “factor-price effect” where changes in the abatement requirement affects factor prices that in turn affect production. The direction and relative strengths of these two effects determine whether production and trade patterns are consistent with or opposite to the pollution haven expectation.