American Economic Review: Insights
ISSN 2640-205X (Print) | ISSN 2640-2068 (Online)
Trade and Trees
American Economic Review: Insights
vol. 6,
no. 2, June 2024
(pp. 155–75)
Abstract
International trade and natural resource exploitation interact in multiple ways. This paper first presents a dynamic game in which the South (S) exploits (e.g., deforests) in order to export (e.g., lumber and agricultural products). Because of negative externalities, the North might lose from trade, unless the resource has already been depleted. Anticipating this, S exploits faster. All negative results are reversed if renegotiation-proof tariffs can be contingent on the size of the remaining resource stock. Larger gains from trade, and more attractive terms of trade, can be used to slow exploitation. Combined with export subsidies, the outcome is first best.Citation
Harstad, Bård. 2024. "Trade and Trees." American Economic Review: Insights, 6 (2): 155–75. DOI: 10.1257/aeri.20230286Additional Materials
JEL Classification
- C73 Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
- D62 Externalities
- F11 Neoclassical Models of Trade
- F13 Trade Policy; International Trade Organizations
- F18 Trade and Environment
- Q23 Renewable Resources and Conservation: Forestry
- Q57 Ecological Economics: Ecosystem Services; Biodiversity Conservation; Bioeconomics; Industrial Ecology