Hostname: page-component-7c8c6479df-hgkh8 Total loading time: 0 Render date: 2024-03-28T03:31:50.226Z Has data issue: false hasContentIssue false

On foreign aid, pollution and abatement

Published online by Cambridge University Press:  18 February 2015

Reza Oladi
Affiliation:
Department of Applied Economics, Utah State University, Logan, UT, USA. E-mail: reza.oladi@usu.edu.
Hamid Beladi
Affiliation:
Department of Economics, University of Texas at San Antonio, One UTSA Circle, San Antonio, TX 78249–0633, USA. Tel: 210–458-7038. Fax: 210–458-7040. E-mail: hamid.beladi@utsa.edu.

Abstract

This paper provides a Ricardian general equilibrium model to study the effect of foreign aid aimed at abating pollution in a small southern recipient economy. The government faces a dynamic problem as it chooses the emission level and abates pollution. The stock of pollution damages consumers and its law of motion is influenced by emission level and the stock of pollution as well as the level of abatement. We show that such type of aid increases emissions, but its effect on pollution stock is ambiguous in the absence of trade. With trade, aid reduces both pollution and emissions given that the recipient country has comparative advantage in the pollution-intensive good. Moreover, such type of aid can be immiserizing with or without trade.

Type
Research Article
Copyright
Copyright © Cambridge University Press 2015 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Abe, K., Sugiyama, Y., and Kiyono, K. (2012), ‘International transfer, environmental transfer, environmental policy, and welfare’, Japanese Economic Review 63(2): 204215.CrossRefGoogle Scholar
Baumol, W.J. (1971), Environmental Protection, International Spillovers and Trade, Stockholm: Almqvist and Wiksell.Google Scholar
Baumol, W.J. and Oates, W.E. (1988), The Theory of Environmental Policy, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Beladi, H. and Oladi, R. (2006), ‘Does foreign aid impede foreign investment?’, Frontiers of Economics and Globalization 1: 5563.CrossRefGoogle Scholar
Beladi, H. and Oladi, R. (2011), ‘Does trade liberalization increase global pollution?’, Resource and Energy Economics 33(1): 172178.Google Scholar
Beladi, H., Liu, L., and Oladi, R. (2013), ‘On pollution permits and abatement’, Economics Letters 119(3): 302305.CrossRefGoogle Scholar
Chakrabarti, A. (2004), ‘Asymmetric adjustment costs in simple general equilibrium models’, European Economic Review 48(1): 6373.Google Scholar
Chao, C.-C. and Yu, E.S.H. (2000), ‘TRIMs, environmental taxes, and foreign investment’, Canadian Journal of Economics 33(3): 799817.CrossRefGoogle Scholar
Chao, C.-C. and Yu, E.S.H. (1999), ‘Foreign aid, the environment, and welfare’, Journal of Development Economics 59(2): 553–64.Google Scholar
Crocker, T.D. (1966), ‘The structuring of atmospheric pollution control system’, in Wolozin, H. (ed.), The Economics of Air Pollution, New York: W.W. Norton.Google Scholar
EU Press Release (2006), ‘LIFE-Third countries 2006: Commission grants €6.5 million to 16 environment projects in neighbouring countries, European Commission Press release, [Available at] http://europa.eu/rapid/pressReleasesAction.do?ref erence=IP/06/1429&format=HTML&aged=0&language=EN&guiLanguage=en.Google Scholar
Hadjiyiannis, C., Hatzipanayotou, P., and Michael, M.S. (2009), ‘Public pollution abatement, regional capital mobility, and tax competition’, Southern Economic Journal 75(3): 703719.Google Scholar
Hadjiyiannis, C., Hatzipanayotou, P., and Michael, M.S. (2013), ‘Competition for environmental aid and aid fungibility’, Journal of Environmental Economics and Management 65(1): 111.Google Scholar
Hatzipanayotou, P., Lahiri, S., and Michael, M.S. (2005), ‘Reforms of environmental policies in the presence of cross-border pollution and public-private clean-up’, Scandinavian Journal of Economics 107(2): 315333.Google Scholar
Hatzipanayotou, P., Lahiri, S., and Michael, M.S. (2008), ‘Cross-border pollution, terms of trade, and welfare’, Environmental and Resource Economics 41(3): 327345.Google Scholar
Ishikawa, J. and Kiyono, K. (2006), ‘Greenhouse-gas emission control in an open economy’, International Economic Review 47(2): 431450.CrossRefGoogle Scholar
Khan, M.A. (1996), ‘Free trade and the environment’, Journal of International Trade and Economic Development 5(2): 113136.CrossRefGoogle Scholar
Lahiri, S. (2004), International Economic Policy in a Globalized World, Heidelberg and New York: Springer.Google Scholar
Lahiri, S. and Raimondos-Moller, P. (1997), ‘Competition for aid and trade policy’, Journal of International Economics 43(3–4): 369385.CrossRefGoogle Scholar
Long, N.V (1992), ‘Pollution control: a differential game approach,Annals of Operations Research 37(1): 549569.Google Scholar
Mukherjee, A., Dijkstra, B.R., and Mathew, A.J. (2011), ‘Environmental regulation: an incentive for foreign direct investment’, Review of International Economics 19(3): 568578.Google Scholar
A.G., Schweinberger and Woodland, A.D. (2008), ‘The short and long run effects of tied foreign aid on pollution abatement, pollution and employment: a pilot model’, Journal of Environmental Economics and Management 55(3): 310325.Google Scholar