Trade and Trees: How Trade Agreements Can Motivate Conservation Instead of DepletionBard Harstad
26 November 2020
Bard Harstad (University of Oslo), 17:15 - 18:45, presents his project in the Interdisciplinary Research Seminar of the GRK "Collective Decision-Making”.
This seminar will take place as a Zoom meeting. Please send (if you haven’t already) an email to cdm.wiso@uni-hamburg.de if you want to register for the seminar. We invite everyone interested to attend!
Abstract
Free trade can often lead to resource depletion, such as deforestation in the tropics. This paper first presents a dynamic model whereby the South (S) depletes to export the extracted units (timber) or the produce (beef) from land available after depletion. Because of the damages, the North benefits from trade liberalization only if the remaining stock is, in any case, diminished. For that reason, S speeds up exploitation. The negative results are reversed if the parties can negotiate a contingent trade agreement, whereby the allocation of gains from trade, and thus the location on the Pareto frontier, is sensitive to the size of the remaining stock. In equilibrium, S conserves to maintain its favorable terms of trade, S conserves more than in autarky, and more when the gains from trade are large. The parties cannot commit to future policies, but they obtain the same outcome as if they could.