Jaume Sempere

Trade liberalization, environmental policy, and welfare

We analyze how trade liberalization affects environmental policies in the context of bilateral trade and imperfect competition. Instead of looking at the strategic distortions that trade introduces in environmental policies—the focus of most existing studies—we analyze how these distortions change in the face of a bilateral reduction in tariffs. The incentives to distort environmental protection may be reduced by this move. As a consequence, environmental policies may be more stringent. Also, welfare is likely (and for some instruments certain) to increase.

Compensated Lindahl Equilibrium: Efficiency Theorems and Gains from Trade with Individual Production and Public Goods

In general equilibrium theory for private good economies, possible discontinuities in budget correspondences create obstacles to decentralizing Pareto efficient allocations, as well as to existence of Walrasian equilibrium with gains from trade. Then McKenzies (1957) notion of compensated demand, and the associated notion of compensated Walrasian equilibrium, are important tools for surmounting such obstacles. Here, for economies that include public goods along with both individual and public production, we provide analogous results for a compensated notion of Lindahl equilibrium.