The Open Economy and the Environment

The Open Economy and the Environment

Development, Trade and Resources in Asia

Ian Coxhead and Sisira Jayasuriya

The Open Economy and the Environment asks what globalization means for environmental quality and the use of natural resources in developing economies. The authors develop theoretical models that trace the effects of trade and trade liberalization on sectoral resource allocation, factor returns, income and welfare, as well as incentives to clear forest and degrade agricultural land. The models reflect important developing economy features including spatial distinctions between uplands and lowlands, open-access forest resources and the special features of domestic food markets. The authors also analyze representative economy submodels, explore empirical cases based on applied general equilibrium models of Asian economies, and examine welfare and environmental implications of migration, trade liberalization and development policy.

Chapter 1: Development–Environment Interactions

Ian Coxhead and Sisira Jayasuriya

Subjects: development studies, development economics, economics and finance, development economics, environmental economics, environment, environmental economics


1.1 INTRODUCTION The World Commission on Environment and Development (WCED) was formed in 1983 by the United Nations to examine ‘the critical environment and development issues and to formulate realistic proposals for dealing with them’. The inquiry – and its 1987 report, Our Common Future – did much to raise international public awareness of the environmental consequences of economic growth. It was the catalyst for a surge in research on growth and the environment, and its ‘call for action’ motivated major initiatives in national and international policy, including the 1992 Earth Summit held in Rio de Janeiro. The WCED characterized the world of the late twentieth century as experiencing dramatic rates of population increase, economic growth and industrialization accompanied by ‘a sharp increase in economic interdependence among nations’. It noted that ‘the industries most heavily reliant on environmental resources and most heavily polluting are growing most rapidly in the developing world, where there is both more urgency for growth and less capacity to minimize damaging side effects’ (WCED 1987: 5). It highlighted what it described as the ‘dissolving of boundaries’ between compartments within which areas of human activity – energy, agriculture and trade – and areas of concern – environmental, economic, and social – were traditionally kept separate. And it emphasized the particular environmental challenges posed, for developing countries, by their dependence on the international economic relationships of trade, aid and investment: Agriculture, forestry, energy production, and mining generate at least half the gross national product of many developing countries and account for even larger...

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