Pollution, trade liberalization, and urban unemployment

Abstract

ABSTRACT We set up a theoretical model to analyze the effects of environmental policy and trade policy on pollution and unemployment. We find that the level of global pollution would fall due to a rise in the environment tax and prove that if the external effect dominates the direct effect then a rise in the environment tax would lead to a reduction in the unemployment rate, and vice versa. In addition, we claim that if the external effect dominates the trade effect then the trade liberalization policy will lead to a reduction in the unemployment rate, and vice versa.