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 4: Deforestation and Upland Land Degradation in an Open Economy: Empirical and Analytical Foundations

Ian Coxhead and Sisira Jayasuriya

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


4.1 INTRODUCTION In Chapter 2 we discussed the general equilibrium modelling of environment, policy and development with reference to a highly abstract model of an economy subject to environmental damage. In Chapter 3 we considered some special characteristics of Asian developing countries not captured in such generic models, and ways in which these structural features might condition environmental and economic responses to policy and other changes. In this chapter we return to a formal modelling approach in order to focus on the likely effects of market and policy changes affecting developing Asian countries; specifically, in the ‘representative’ economies described in section 3.5. In constructing models of the representative economies we retain the emphasis on natural resource issues, primarily deforestation and land degradation (though the models can be extended with relative ease to address other environmental issues, such as industrial emissions). The focus on natural resource issues is not intended to imply that other types of environmental problems are unimportant. Rather, it is because a high degree of stylization and simplification is necessary in order to provide a coherent yet concise problem statement for modelling purposes. The trade-off permits us to identify and explain the main economic processes, generate predictive statements, and motivate the more detailed, yet less transparent, extensions and empirical applications found in Chapters 5–8. 4.2 MODELLING TRADE AND ENVIRONMENTAL PROCESSES: STYLIZED FACTS We begin in this section with a model that can be used to explore and understand, in stylized form, environment–economy...

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