Speaker: CUI Jingbo, Wuhan Univerisity
Host: Xiaoguang Chen, Professor, RIEM
Time: 14:30--16:00, Friday, Nov. 28
Venue: H515 Yide Hall, Liulin Campus
Abstract: In this paper, I introduce an environmental externality and factor-biased technology adoption into a trade model with heterogeneous firms. The paper explores how firms’ decisions of technology adoption and of exports are affected by the openness to trade and the stringency of environmental regulations. I show that: (i) these decisions induced by tightened environmental policies depend upon whether the upgraded technology is labor-biased or emission-biased; (ii) the environmental impact of trade cost reductions on the aggregate emissions and price of emission permit varies with the factor-biased feature; and (iii) regardless of the factor-biased feature, the trade cost reduction induces firms to export and to upgrade the factor-biased technology, while it forces the least productive firms to exit the market. Moreover, I calibrate the model and simulate scenarios of bilateral and unilateral policy variations in trade variable cost and environmental policy. The effects of the unilateral stringent environmental policy on emissions market and social welfare in the home and foreign countries are examined.
