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 3: Growth and the Environment in Developing Asian Economies

Ian Coxhead and Sisira Jayasuriya

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


3.1 INTRODUCTION The analysis in Chapter 2 presented a decomposition of the aggregate effects of trade on the environment, and expounded the fundamental methodology for general equilibrium analysis of economic and environmental phenomena in open economies. It was established, among other things, that among countries which are open to international trade, ‘shocks’ in the form of world price changes or changes in the degree to which a country is open to trade have general equilibrium effects through changes in domestic product and factor prices. It follows that when different sectors of an economy are associated with different types and intensities of pollution or natural resource degradation, the environmental consequences of shocks that have differential sectoral effects can only be traced through general equilibrium mechanisms. The models that yield these propositions provide general theoretical foundations for both positive and normative economy-wide analyses of environmental problems in open economies. However, they yield insights through a high level of abstraction, and as such have obvious drawbacks for exploring specific issues in a particular kind of economy. While the effects of a shock can in principle be fully identified in the simplest cases, in the presence of both environmental and policy-related distortions it is in general impossible to make firm predictions about the effects of a shock on welfare or the environment. Use of highly abstract models to address questions such as those regarding the relationship between trade, or trade policy reform, and the...

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information