Northeast Asia regional economic and environmental policy collaboration

This dissertation has two major components: theory and empirical evidence. The research develops models and conducts laboratory experiments to answer a basic question: How do we regulate international externalities given sovereignty constraints, increasing domestic decentralization and the integration of the world market?; In the first theoretical paper, I use a general equilibrium trade model to study the impact of different government policies such as capital tax and carbon tax on the environment, the resource allocation and the income distribution between a debtor country and a creditor country. I incorporate an endogenous growth model to investigate the effects of public capital and clean technology investment on the long-run growth rates of carbon emissions and of per capita income in China and Japan. In the second theoretical paper, I use a two-country two-period infinite-horizon overlapping generations model to study the interaction of a carbon tax with a capital tax in a world of North-South trade. The papers show that the developing country and the industrial country can coordinate their economic and environmental policy by taking into account of carbon emissions increase due to capital flow. The policy implications of the theoretical analyses indicate that clean technology transfer may serve as a politically feasible means towards economic and environmental policy cooperation between China and Japan.; The empirical section of my dissertation investigates the empirical properties of two types of emissions permits trading systems practiced in China and in the US. During a laboratory experiment, a market is created where profit-motivated student subjects act as buyers and sellers of a commodity under two market trading rules. The experiments were conducted both in Wuhan University, China and in the University of California, Santa Cruz. The results of data analysis show that uniform price market trading rule is more efficient and less likely to be manipulated by traders in both countries. This result provides understanding for price determination and for designing international carbon emissions permits market between the developing countries and the industrial countries.; Overall, the dissertation contributes to the understanding of economic integration and environmental management among countries in the Northeast Asian region.