International trade and terrestrial open‐access renewable resources in a small open economy

AbstractIn this paper, I investigate the effects of trade liberalization and policies on deforestation by extending a small open economy model with open‐access renewable resources developed by Brander and Taylor (1997a) . I endogenize the carrying capacity of the resource. I find, unlike Brander and Taylor, that trade liberalization may increase the forest stock in the resource‐abundant country and may decrease the forest stock in the resource‐scarce country. Moreover, the policies primarily aimed at protecting forests, such as import restrictions by importing countries and forest certification for well‐managed forests, may have perverse effects on the forest stock.