A public-good approach to environmental economy

摘要

This paper investigates the economic implications of environment in the 2 x 3 Heckscher-Ohlin model by expounding the multidimensional roles of the environment for the economy: as a public input used to produce goods and services; as a by-product dependent on the composition of goods and services; and as a public good directly affecting social utility. It is shown that the sectoral environment-output responses play a critical role for determining the economy's factor prices, outputs, employment, and welfare, and that, in a dynamically stable (unstable) environment, the optimal policy is free trade (a production tax-cum-subsidy scheme).