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Trade and Global Pollution in Dynamic Oligopoly with Corporate Environmentalism

Authors

  • Akihiko Yanase

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    1. Graduate School of International Cultural Studies, Tohoku University, Japan
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    • I wish to thank Junichi Itaya, Noritaka Kudoh, Ryuichi Tanaka, Akihiko Kaneko, Takanori Adachi, Gahyeong Hur, seminar participants at Hokkaido University, Tokyo Institute of Technology, and Seoul National University, and two anonymous referees for their helpful comments and suggestions on earlier manuscript drafts. The author is also grateful to the Ministry of Education, Culture, Sports, Science and Technology for its support of this research under the Grant-in-Aid for Young Scientists (B) #21730180.


Yanase: Graduate School of International Cultural Studies, Tohoku University, 41 Kawauchi, Aoba-ku, Sendai 980-8576, Japan. Tel: 81-22-795-7556; Fax: 81-22-795-7583; E-mail: yanase@intcul.tohoku.ac.jp.

Abstract

This paper examines the effects of international trade in the presence of dynamic oligopolistic competition where the stock of global pollution has a negative welfare effect and the oligopolists' objectives may include society's pollution damage as well as private profits. In a symmetric case where the number of firms, emission coefficient, and firms' environmental consciousness are the same in two countries, an opening of trade unambiguously improves each country's welfare in the short run. In the long run, however, trade increases the stock of global pollution and hence, whether opening of trade is beneficial depends on the parameters of the economy. If there are asymmetries between countries, the short-run gains from trade in both countries are not necessarily guaranteed, because trade liberalization may increase output in one country and reduce it in the other. Moreover, free trade may result in lower pollution stock than under autarky.

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