Trade Restrictiveness and Pollution
Chau, Nancy H.; Fare, Rolf; Grosskopf, Shawna
This paper proposes a trade restrictiveness indicator that explicitly incorporates environmental externalities. The index employs directional distance functions and use indicators (i.e. differences rather than ratios) modified to account for and evaluate efficiency changes in the face of simultaneous and multi-dimensional trade and environmental policy reforms. The index is made up of two components, one for production and one for consumption. Our overall trade restrictiveness indicator is accordingly the difference of the two. The properties of the indicator are developed and discussed together with its estimation.
WP 2007-15 September 2007JEL Classification Codes: F18
Charles H. Dyson School of Applied Economics and Management, Cornell University