Akihiko Yanase

Dynamic Games of Environmental Policy in a Global Economy: Taxes versus Quotas

The effects of environmental policy on the global environment as an international public good with a stock externality and national welfare are examined in a model with trade in a polluting commodity. The welfare effects of environmental policy, decomposed into terms of trade, abatement cost, and environmental damage effects, induce governments to adopt a strategic use of their policy measures. In the absence of international cooperation on environmental policy, it is demonstrated that the emission tax game brings about larger strategic distortions than the emission quota game.

Trade, Strategic Environmental Policy, and Global Pollution

This paper examines the effects of international trade in a model with global pollution that accumulates over time because of production emissions in each country. If countries cooperatively determine their environmental policies, autarky and free trade in the absence of trade costs generate the same optimal solution. By contrast, if environmental policies are determined noncooperatively, the effects of trade on global pollution and welfare are ambiguous because policy games can result in multiple equilibria. Although trade increases both the lower and upper bounds of the pollution stock, whether trade expands the range of possible steady-state pollution levels is ambiguous. The analysis then extends to consider trade costs.

Free Trade Agreement and Vertical Trade with a Manufacturing Base

We examine the effects of free trade agreement (FTA) on tariffs and welfare in a three‐country model with vertical trade, where an FTA is formed between a country exporting a final good whose production involves using an intermediate good, and a country exporting the intermediate good in exchange for the final good. We demonstrate that the FTA reduces its member countrys external tariff, whereas it raises the non‐member countrys tariff. The non‐member country unambiguously becomes better off. In contrast, the FTA may or may not make its member countries better off. This implies that the formation of an FTA may not always be Pareto‐improving.

History‐Dependent Paths and Trade Gains in a Small Open Economy with a Public Intermediate Good

This study reexamines McMillans (International Economic Review 19 (1978), 665–78) analysis of a dynamic small open economy with a public intermediate good. Concerning the trade patterns of the open economy, we find results that were overlooked in McMillans analysis. Among others, if labor endowment is of intermediate size, there are two saddle‐point steady states, and the initial stock of the public good determines the long‐run trade pattern. We also add a gains‐from‐trade analysis to McMillans model and demonstrate that if the economy has a comparative advantage in a good with productivity less sensitive to the public intermediate good, the economy may lose from trade at the steady state.

Indeterminacy and Pollution Haven Hypothesis in a Dynamic General Equilibrium Model

This paper develops a two-sector dynamic general equilibrium model of a small open economy in which production activities are accompanied by pollution emissions that have a negative effect on welfare. It is shown that the dynamic equilibrium may display indeterminacy (i.e., continuum of dynamic equilibrium paths converging to a common steady state), depending on (i) the relationship between capital intensity and pollution intensity, (ii) the property of households’ discount rate as a function of total pollution, and (iii) the pollution-consumption relationship in instantaneous utility. In addition, the effect of environmental policy on the economy’s comparative advantage and its relation to indeterminacy are examined.

Dynamic Interactions in Trade Policy in a Differential Game Model of Tariff Protection

This paper develops a two‐country dynamic game model of tariff protection to reconsider optimal trade policies and their implications for welfare. The authors show that an import subsidy is optimal in the feedback Nash equilibria, which results in a curious possibility that the domestic market is monopolized by the foreign firm. However, welfare comparisons among Nash equilibria, free trade, and autarky reveal that feedback Nash equilibria involve higher welfare than both autarky and free trade, i.e. dynamic noncooperative choices of policy serve as tacit policy coordination and ensure larger trade gains relative to free trade.

A Dynamic International Trade Model with Endogenous Fertility

This paper examines a two-country dynamic general equilibrium model with endogenous fertility. We show that the introduction of child-rearing behavior brings about new properties in long-run dynamics. After an analysis of the existence, uniqueness, and local stability of the long-run equilibrium, we examine the international trade pattern and comparative statics in order to identify the differences with the standard dynamic international trade model.

Open-Access Renewable Resources as Inputs and International Trade: A Small Open Economy

This paper develops a small-open-economy model in which two final goods are produced by using a primary factor and a resource good, which has an open-access property and is produced from the primary factor. Under the assumption that only the final goods are tradable, the economys patterns of specialization both in the temporary equilibrium and in the steady state are derived. It is shown that in the steady state, the economy either completely specializes in one good or diversifies production, depending on the labor endowment and the growth rate of the resource. The long-run effects of trade on the resource stock and national welfare are also examined.

An Analysis of Public Intermediate Goods Supply in a Dynamic Small Open Economy Once Again

This study re-examines McMillan’s analysis (1978) of a dynamic small open economy with a public intermediate good. On the trade patterns of the open economy, we find results that were overlooked in McMillan’s analysis. Among others, if labor endowment is of intermediate size, there are multiple long-run equilibria and the initial stock of the public good determines the long-run trade pattern. We also add the gains-from-trade analysis to McMillan’s model and show that if the economy has a comparative advantage in a good with productivity less sensitive to the public intermediate good, the economy may lose from trade in the long run.

Endogenous Time Preference and Consumption Externalities in a Small Open Economy: Multiple Steady States and Indeterminacy

This paper presents a two-sector dynamic general equilibrium model in a small open economy and considers the role of endogenous impatience and consumption externalities in a neoclassical growth model. In the case of socially increasing marginal impatience, there exists a unique and saddle-point stable steady state. By contrast, in the case of socially decreasing marginal impatience, there may exist multiple steady states and the dynamic equilibrium around the steady state with incomplete specialization may exhibit indeterminacy. The occurrence of the indeterminacy result requires a large degree of increasing time preference in average consumption and a socially decreasing marginal impatience which means that the slope of the supply curve for capital is negative in the long-run. In addition, the long-run effects of a terms-of-trade deterioration on the economys comparative advantage and its relation to indeterminacy are examined.