A Note on Trade Liberalization and Common Pool Resources
17 Pages Posted: 9 Aug 2005
When countries share access to a common resource stock, optimal management is based on strategic considerations. We develop a general equilibrium model and show that regulatory policies are strategic substitutes under autarky. Trade liberalization not only changes relative prices, but may change the qualitative nature of the game between jurisdictions. In the small country case with exogenous prices, regulatory policies become strategic complements. In the context of a two-country model, policies remain strategic substitutes but the factors that drive policy changes differ from those under autarky and the small country case. The implications for conservation and resource management are discussed.
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