Canadian Journal of Economics

This paper provides theory and evidence on the links between income inequality within a destination country and the patterns of trade and export prices. The theoretical framework relates income inequality to product quality and prices using a simple demand composition effect. The model predicts that a more unequal income distribution in a destination country leads to higher average prices, though the effect is nonlinear and disappears for rich enough countries. The predictions are tested using detailed firm‐level data. Controlling for income per capita, prices are systematically higher in more unequal destinations, and the strength of this effect depends on income per capita. Results are particularly important for middle‐income countries and hold only for differentiated goods, and in particular for products with a high degree of vertical differentiation.

Abstract We investigate the impact of alternative certifying institutions on firms’ incentives to engage in costly Corporate Social Responsibility (CSR) activities as well as their relative market and societal implications. We find that the CSR certification standard is the lowest under for‐profit private certifiers and the highest under a Non Governmental Organization (NGO), with the standard of a welfare‐maximizing public certifier lying in between. Yet, regarding industry output, this ranking is reversed. Certification of CSR activities is welfare enhancing for consumers and firms and should be encouraged. Finally, the market and societal outcomes of CSR certification depend crucially on whether certification takes place before or after firms’ CSR activities.

Some believe that relatively lenient environmental standards give developing countries a comparative advantage in pollution–intensive goods. Thus, freer trade will harm their environment. This paper brings together the literature on openness and growth, and on the environmental Kuznet’s curve, to demonstrate that the opposite may be true. A simultaneous–equations system is derived which incorporates multiple effects of trade liberalization on the environment. Estimation using pooled provincial data on Chinese water pollution, suggests that freer trade aggravates environmental damage via the terms of trade, but mitigates it via income growth. Simulations suggest that the net effect in China was beneficial. JEL Classification: Fl3, Q28, 0l9

Est–ce que la libéralisation du commerce est nuisible pour l’environnement? Un nouveau test. Certains croient que des normes environnementales relativement peu contraignantes donnent un avantage comparatif aux pays en voie de développement dans la production de biens qui polluent intensivement. Donc, un commerce plus libre contribuera à nuire à l’environnement. Ce mémoire synthétise la littérature spécialisée sur l’ouverture des marchés et la croissance, ainsi que sur la courbe de Kuznets, pour montrer que l’inverse est vrai. On dérive un système d’équations simultanées qui incorpore les multiples effets de la libéralisation du commerce sur l’environnement. La calibration de ce système, en utilisant de manière intégrée les données provinciales de pollution de l’eau en Chine, suggère qu’un commerce plus libre aggrave l’état de l’environnement par le truchement du jeu des termes d’échange, mais que cet effet est mitigé par l’effet de croissance des revenus. Des simulations suggèrent que l’effet net en Chine est positif.

This paper documents a relationship between international trade and environmental performance at the plant level. Using a panel of establishment‐level data from 1990–2006, I estimate the relationship between export orientation, import competition and pollution emissions. I find a robust relationship between international trade and pollution levels. Exporters emit 9% to 13% less after controlling for output, but there is significant heterogeneity across industries. Import competition is associated with the exit of the smallest, most pollution‐intensive plants. There is no evidence that this result is caused by polluting firms relocating to countries with low levels of environmental regulation and importing back into the US.

Variations in environmental conditions affect renewable resource growth. The ability to predict such variations is improving, providing scope for improved management. We generalize a common stochastic stock recruitment model to explore how optimal management changes with environmental prediction. We obtain three main results. First, while it might seem that a prediction of adverse future conditions should lead to more conservative management, the opposite may be true. Second, optimal management requires only a one‐period‐ahead forecast, suggesting forecast accuracy is more important than forecast lead time. Finally, we derive conditions on environmental fluctuations guaranteeing positive optimal harvest in every period.

Gestion d'une ressource renouvelable quand on prédit les conditions futures de l'environnement. Les variations dans les conditions de l'environnement affectent la croissance de la ressource renouvelable. La capacitéà prévoir ces variations s'améliore et ouvre la possibilité d'améliorer la gestion de la ressource. Les auteurs utilisent un modèle de ressource renouvelable avec croissance stochastique et obtiennent trois résultats. D'abord, alors qu'il peut sembler que des prévisions pessimistes de conditions difficiles dans l'avenir peuvent conduire à une gestion plus conservatrice, le contraire peut être vrai. Ensuite, la gestion optimale requiert seulement une prédiction pour la prochaine période: voilà qui suggère qu'il est plus important d'avoir une prévision exacte que d'avoir des prévisions à plus long terme. Enfin, on développe les conditions pour les fluctuations de l'environnement qui garantissent une récolte positive optimale à chaque période.

Abstract.  I investigate the effect of exclusive territories, which are typical vertical controls imposed by upstream firms. Using shipping spatial models, I consider an industry that consists of many independent local markets. An upstream monopolist restricts competition between downstream firms using exclusive territories. I find that exclusive territories reduce the prices of final products in all local markets in quantity‐setting competition. In price‐setting competition, they raise prices in half the local markets, reduce them in other markets, and also reduce the total consumer surplus. JEL classification: L42, R32