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Trade Restrictiveness and Pollution

Authors


  • Nancy H. Chau, Charles H. Dyson School of Applied Economics and Management, Cornell University, Ithaca, NY 14853 (hyc3@cornell.edu). Rolf Färe, Department of Economics, Oregon State University, Corvallis, OR 97331 (Rolf.Fare@orst.edu). Shawna Grosskopf, Department of Economics, Oregon State University, Corvallis, OR 97331 (Shawna.Grosskopf@orst.edu).

  • We are grateful to an associate editor of this journal and a referee for insightful suggestions and comments. The usual disclaimer applies.

Abstract

This paper proposes a trade restrictiveness indicator that explicitly incorporates environmental externalities. The index employs directional distance functions and uses indicators (i.e., differences rather than ratios) modified to account for and evaluate efficiency changes in the face of simultaneous and multidimensional trade and environmental policy reforms. The index is made up of two components, one for production and one for consumption. Our overall trade restrictiveness indicator is accordingly the difference of the two. The properties of the indicator are developed and discussed together with its estimation.

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