IS THERE A TRADE-OFF BETWEEN TRADE LIBERALIZATION AND POLLUTION-ABATEMENT - A COMPUTABLE GENERAL EQUILIBRIUM ASSESSMENT APPLIED TO COSTA-RICA

Recent literature elucidates important link ages between trade and env ironment, emphasizing on the possible reconciliation between trade lib eralization and emission abatement policies. Facing the lack of robust ness of qualitative results shown in theoretical work, this paper atte mpts a quantitative assessment of the interdependencies of these polic ies. A recursive dynamic CGE model for Costa Rica shows that environme ntal taxes marginally reduce growth yet allow a sharp decrease of emis sions, and that outward orientation alone promotes growth, but induces a risk of specialization in dirty activities. Free trade combined wit h appropriate effluent taxes enhances factor reallocation towards comp etitive industries, and hence growth, while significantly abating emis sions. (C) 1998 Society for Policy Modeling. Published by Elsevier Sci ence Inc.