Yasuhiro Takarada

Shared Renewable Resources: Gains from Trade and Trade Policy

This paper examines the effects of international trade and trade policy in a two‐country, two‐good model with an open‐access renewable resource that is internationally shared. We show that both countries may still benefit from trade when they specialize in the production of their comparative advantage good, although the shared resource is reduced by trade. In addition, we demonstrate that the steady state utility of a resource‐good importing country may be reduced by trade, even if it specializes in the production of a non‐resource good. Import tariffs and export taxes on a resource good may increase or decrease the shared stock level depending on the production patterns in a trading steady state. The trade policy is likely to be Pareto‐improving when the shared stock rises, while both countries may be made worse off by the trade policy when the shared stock falls.

Welfare effects of international income transfers under transboundary pollution

This article examines the welfare effects of international income transfers in a two-country, two-good model with transboundary pollution. Most existing studies have assumed that pollution negatively affects the consumer’s utility function instead of influencing production. In our model, there is interindustry interaction caused by pollution. First, we show the effects of aid on each country’s welfare. Second, we show that untied aid improves world welfare if the marginal propensity to consume the polluting good in the donor country is larger than in the recipient country. We also derive the condition for Pareto-improving untied aid. The source of welfare improvement is productivity gains induced by a reduction in pollution.

Foreign aid, tariff revenue, and factor adjustment costs

Using a two-country two-good model, we examine the welfare effects of foreign aid that facilitates factor movement between industries in the recipient country. The government of the donor country produces a public input, which the recipients government is forced to purchase by spending aid as well as tariff revenue. The recipient uses the public input to convert one specific factor to another. We show that tied aid can benefit the recipient if the factor movement is beneficial. Tied aid can make the donor better off when the recipient imposes the import tariff.