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 9: Conclusion

Ian Coxhead and Sisira Jayasuriya

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


The broad objective of this book has been to contribute to a deeper understanding of the links between economic activities and environmental outcomes in developing countries experiencing the multifaceted impact of globalization and policy reforms. Such an understanding is essential to the formulation of economy-wide policies to promote better patterns of natural resource use and sustain environmental quality in developing countries. Our particular emphasis has been on developing economies of Asia confronting serious environmental challenges. These have been caused not only by air and water pollution in urban areas but also by changes in patterns of land use that have had major effects on levels of resource degradation and overall environmental outcomes. Land degradation and deforestation in major watersheds are issues of overriding concern, and different types of land use and associated agricultural techniques have markedly different environmental effects. We have been guided in our analytical approach by the recognition that policies to address environmental goals must form an integral part of a country’s strategy for achieving major development goals, such as rapid economic growth, distributional equity, poverty alleviation and macroeconomic stability. Optimal development policies must establish a politically sustainable balance among economic, social and environmental goals. Hence, we have adopted an economy-wide framework to capture the general equilibrium repercussions of exogenous changes and policy measures on key variables of policy interest, presenting both low-dimensional analytical models that encompass the most important countryspecific characteristics as special cases, and richer, more fleshed out, empirical AGE models...

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