摘要：Several studies hypothesize exogeneous environmental regulation as the primary motive for trade betweentwo regions, often predicting a lower welfare for the region with incomplete environmental protection. Suchanalyses do not allow the region to adjust its environmental policy in response to a shift in the trade regime.Further, they do not allow the region to refuse free trade in the face of a welfare loss. As an alternativeI propose a common agency model of government to endogenize environmental policy and the choice oftrade regime. Conditions for th e incomplete internalization of an environmental externality are specified,and the pollution tax in autarky is compared to that under free trade. The paper finds that movingto free trade induces a tightening of pollution policy, and reduces the deadweight loss from incompleteenvironmental regulation. In contrast to the predictions from earlier articles, the adoption of free tradeincreases aggregate welfare. This gain occurs even when the country with incomplete environmentalprotection exports the pollution intensive good.
关键词：Trade and environment; common agency; political economy; pollution policy; lobbying
