Essays on International Trade and the Environment

Abstract

This work is concerned with the interdependent relationship between trade and the environment. It comprises three chapters. The first chapter (work done jointly with Joel Rodrigue) builds and estimates a dynamic model of investment in environmental abatement and exports with heterogeneous firms. The results suggest that firm-level environmental investment has little impact on productivity dynamics but does encourage growth in export demand. Counterfactual policy experiments suggest that trade liberalization and abatement subsidies encourage both export growth and abatement. In contrast, allowing only firms with previous abatement experience to export encourages abatement but causes export participation to fall. The second chapter considers the impact of not having an environmental agreement on trade negotiations when pollution has cross-border effects. In a two-stage game of trade and environmental policy choices between national governments, the timing of trade negotiations matters for efficiency. Also, trade policy choices reflect concerns about the pollution externality. The third chapter examines whether the 1990 Clean Air Act Amendments were an important determinant of tariff rates in U.S. industries with varying pollution intensity. In the years following the Act, tariff rates increased disproportionately in industries with higher pollution intensity.