TRADE AND THE ENVIRONMENT: AN ECONOMIC LITERATURE SURVEY

Abstract

This document attempts to organize and summarize the major developments of the trade and environment literature observed during the last ten years. Both the major theoretical and empirical contributions are presented and discussed. This includes an overview of the different methods economists have used to describe the environmental externalities, and decompose their welfare effects in open economies. Additionally, guided by the literature we review the policy implications in the presence of two distortions: price (tariff) and environmental, when policymakers are benevolent or are more lenient for certain political groups. Finally, a brief review to the critique of traditional economic research is presented.

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