The Effect of Environmental Control Costs on u.s. Trade

156 p.Thesis (Ph.D.)--University of Illinois at Urbana-Champaign, 1981.In recent years, there has been speculation regarding the impact of pollution abatement expenditures on the competitiveness of the United States in international trade. There have been several attempts to measure the magnitude of the effect; however, the initial attempts to analyze the problem were hampered by the sparseness of data for pollution abatement expenditures on a disaggregated level and an inadequate theoretical framework.This thesis addresses both limitations by constructing a general equilibrium model of the U.S. economy disaggregated to the 64 sector level in which pollution abatement expenditures will be introduced as a modification of the production function of each sector. The official data on the expenditures for pollution abatement used in this study have not, heretofore, been exploited. After computing a general equilibrium solution with pollution abatement expenditures, another general equilibrium solution excluding pollution abatement expenditures is calculated and the results are compared. The results of interest include changes in exports and imports, along with other changes in the economy, that would arise if pollution abatement expenditures were removed. To obtain an indication of the importance of pollution abatement expenditures, the model also analyzes the case where U.S. tariffs are removed.In addition, the effective protective rate equation is expanded to allow for the impact of environmental control costs as negative effective protection on each industry. This provides a benchmark measure for the impact of pollution abatement costs on U.S. competitiveness in a general equilibrium framework.Although several sectors of the economy are shown to be severely affected by pollution abatement costs, the overall affect on the competitiveness of the United States in international markets, relative to the impact of tariffs, does not seem large enough to warrant any drastic revision in current environmental laws.U of I OnlyRestricted to the U of I community idenfinitely during batch ingest of legacy ETD