5.0 out of 5 stars
required reading, Nov. 6 2003
This book should be required reading for anyone interested in the economics of trade and environment interactions. Copeland and Taylor have long since established themselves as leaders in this field; this book cements their reputation and will be the standard text for anyone teaching a graduate or senior level course on the subject of Trade and the Environment. I have already used this book in my own teaching. This clearly written text is fun both to read and teach from. Moreover, prior knowledge of trade theory is unnecessary for either instructors or students to take full advantage of this book.
Chapter 2 lays out the analytical framework, which fuses a general model of competitive trade with a tractable treatment of industrial pollution. This comprehensive chapter does such a good job at covering the underlying competitive trade theory that I will probably also use it to teach such models in my graduate International Trade classes in the future.
The following chapters utilize the analytical model to address pressing debates within international environmental economics. Chapter 3 examines the theoretical assumptions that would be necessary for "Environmental Kuznet's Curves" (EKCs) to exist. This chapter alone is enough to recommend this book, as a decade of prior research on EKCs has failed to provide a systematic theoretical treatment of the subject.
In chapters 4, 5 and 6, Copeland and Taylor examine the impacts of trade liberalization on environmental quality. In preparation for their empirical chapter, the authors provide a systematic analysis of two competing hypotheses: the Pollution Havens hypothesis, and the Factor Endowments hypothesis. The Pollution Havens hypothesis argues that trade liberalization will drive polluting industry to poor countries that have weak environmental regulations. Yet little of the previous empirical work has found support for this hypothesis. Copeland and Taylor show that a long-accepted relationship from trade theory---the Factor Endowments hypothesis, which argues that trade liberalization will shift capital intensive industry to capital intensive (rich) countries---has an offsetting effect on the location of dirty industry, and provides a likely explanation for the non-results of previous empirical work. This is an argument the authors have made elsewhere, and I am glad that they allocate the space in their book to fleshing out the details.
In chapter 7 Copeland and Taylor draw together the theoretical predictions of their previous chapters to test empirically how free trade affects sulphur-dioxide concentrations in countries around the globe. They reveal that openness per se has little impact on pollution concentrations; instead, what matters is the combination of openness and country attributes. They conclude with a compelling '1% rule': "if openness to international markets raises both output and income by 1%, [sulfur-dioxide] concentrations fall by approximately 1%" (p.272). That is, freer trade may be good for the environment.
My only complaint with the book is that it isn't longer. The authors focus on the problem of industrial pollution in competitive, open economies. Additional chapters covering cases in which firms exert market power, or in which pollution is generated by consumers directly, would also be useful for students and practitioners alike. I suppose this means they'll just have to be encouraged to write a second volume.