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 7: Development Policy and the Environment in Sri Lanka

Ian Coxhead and Sisira Jayasuriya

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


7.1 INTRODUCTION1 This chapter presents the second of the three case studies applying the general methodological approach of Chapter 4 to specific environmental issues. Our focus in this chapter is on land degradation in the hilly regions of Sri Lanka. In recent years the implementation of wide-ranging policy reforms and institutional changes designed to move Sri Lanka towards a liberal, outward-oriented, market economy – argued to be essential to economic growth – has intensified concerns about environmental degradation and the sustainability of the country’s natural resource base. These have been accompanied by debates about the environmental consequences for Sri Lanka of policy reforms in the broader context of Sri Lanka’s obligations under the World Trade Organization (WTO). Sri Lanka’s environmental problems are both serious and multidimensional (ADB 1990). Among these, the issues of deforestation and land degradation have a long and prominent history, recognized as far back as the 1870s and discussed regularly since the 1920s. In addition, the degradation of coastal eco-resources and environmental pollution in urban industrial zones have been identified as areas requiring urgent remedial action. There is also a general consensus that past policies, which relied almost solely on regulatory mechanisms, have been ineffective in practice, and that concrete and effective policies to address environmental concerns are urgently needed. There is now a far greater appreciation of the costs of environmental degradation within the general community, and government policy statements almost invariably make specific reference to environmental issues. The wide-ranging nature of...

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