Yusuf, Arief Anshory (2007): Who Pay for the Cleaner Air? Distributional Impact of Environmental Policy in a Dualistic Economy.
Download (201kB) | Preview
Using a technology where pollution is regarded as by-product of industry's activity and applied in a simple setup of Heckscher-Ohlin-Copeland-Taylor model, this paper analyses the possible distributional impacts of stricter environmental policy in a developing country characterized by the presence of labor-intensive informal sector which may not be a subject to the environmental regulation, and capital intensive formal sector which may face minimum wage policy. The comparative static analysis illustrates that stricter environmental regulation if enforced uniformly accross industries in undistorted labor market, hurts both labor and capital owner, leaving income ditribution unchanged. On the contrary, when economy is dualistic, income distribution may change due to labor reallocation. When the stricter regulation can only be enforced in formal sector, capital owner will be worse-off while labor are better-off. If initially capital reward is higher, the environmental policy will improve income distribution in favor of labor. The change in income distribution is greater when economy is dualistic.
|Item Type:||MPRA Paper|
|Institution:||Australian National University|
|Original Title:||Who Pay for the Cleaner Air? Distributional Impact of Environmental Policy in a Dualistic Economy|
|Keywords:||Environmental Policy; Dualistic Economy; Distribution|
|Subjects:||Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q52 - Pollution Control Adoption and Costs ; Distributional Effects ; Employment Effects
O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors ; Shadow Economy ; Institutional Arrangements
|Depositing User:||Arief Anshory Yusuf|
|Date Deposited:||09. Feb 2007|
|Last Modified:||13. Mar 2015 07:17|
References Baumol, W. J., & Oates, W. E. (1988). The theory of environmental policy. Cambridge; New York and Sydney: Cambridge University Press. Chao, C., Kerkvliet, J. R., & Yu, E. S. H. (2000). Environmental preservation, sectoral unemployment, and trade in resources. Review of Development Economics, 4(1), 39-50. Copeland, B. R., & Taylor, M. S. (2003). Trade and the environment: Theory and evidence. Princeton and Oxford: Princeton University Press. Copeland, B. R., & Taylor, M. S. (1997). A simple model of trade, capital mobility, and the environment. Daitoh, I. (2003). Environmental protection and urban unemployment: Environmental policy reform in a polluted dualistic economy. Review of Development Economics, 7(3), 496-509. Dean, J. M., & Gangopadhyay, S. (1997). Export bans, environmental protection, and unemployment. Review of Development Economics, 1(3), 324-336. Falvey, R, R. Tyers and R. McDougall (1997), Trade shocks and the magnitude of transmitted wage adjustments. Working Papers in Economics and Econometrics. No. 318, Faculty of Economics and Commerce, Australian National University. Imam, M. H., & Whalley, J. (1985). Incidence analysis of a sector-specific minimum wage in a two-sector harris-todaro model. Quarterly Journal of Economics, 100(1), 207-224. Raghbendra Jha and John Whalley (1999). "The Environmental Regime in Developing Countries," NBER Working Papers 7305, National Bureau of Economic Research, Inc. Johnson, Harry G (1969), Minimum Wage Laws: A General Equilibrium Analysis. Canadian Journal of Economics, November 1969, 2, 599-604. Jones, R.W. (1965.) The Structure of Simple General Equilibrium Models. Journal of Political Economy, 73: 557-572 Jones, R. W. (1971). Distortions in factor markets and the general equilibrium model of production. Journal of Political Economy, 79(3), 437-459. Kar, S., & Marjit, S. (2001). Informal sector in general equilibrium: Welfare effects of trade policy reforms. International Review of Economics and Finance, 10(3), 289-300. Kriström, B. (2003), Framework for Assessing the Distribution of Financial Effects of Environmental Policies, paper prepared for the OECD Workshop on the Distribution of Benefits and Costs of Environmental Policies, Paris 4-5 March 2003. Magee, S. P. (1973). Factor market distortions, production, and trade: A survey. Oxford Economic Papers, 25(1), 1-43.