A Study On The Influences Of Transboundary Pollution On Trade Structure And Welfare

Concerned about environmental issues has become the consensus of scholars, but thestudy of transboundary pollution is not very detailed preparation. To exploretransboundary pollution on impact of trade structure and gains from trade, we establishthe effects of transboundary pollution on trade and welfare in a general equilibriummodel.The model assumes two countries, while the production of two products，productionof non-cleaning products (produced with polluting) will reduce the efficiency ofalternative product. because of the presence of transboundary pollution, This effect willalso reduce the productivity of the two national cleaning products. Both countries expendtwo products, at the same time, they expend the pollution. Therefore, the pollution levelof the two countries will change their level of utility. Ultimately, impact on utility isdetermined by skill level, local pollution factors, transboundary pollution factors andnational scale.Trade may lead to international division of labor, but not always lead to efficientpatterns of specialization. Transboundary pollution may improve gains from trade, but itcan exacerbate losses from trade. According to the principle of comparative advantage ininternational division of labor, we Conclude this: If both nations’ production technology isheterogeneous, the nation with cleaner production technology will loss from trade. This isa important implications for the setting of environmental policy. If transboundary pollutionis unidirectional, the nation, who is only local pollution, will always gains from trade. Thenation who is local pollution and transboundary pollution, will unlike get benefit fromtrade, tariff policy is needed to coordinate the trade. If the country size is different, thesmall country will likely benefit from trade, but the big country will lose from trade.