International trade, species diversity, and habitat conservation

Trade barriers may improve welfare if property rights with respect to renewable natural resources are lacking. Previous studies focus on the role of overharvesting, but we argue that trade-induced habitat destruction should also be taken into account. Habitat is one of the key factors determining the long-run viability of many natural resources, and economic activity oftentimes goes at the expense of habitat. While open access gives rise to within-industry externalities, habitat destruction creates across-industry externalities. We identify under what circumstances trade liberalization is welfare-enhancing as well as contributing to nature conservation, and analyze the consequences of trade policy. © 2004 Elsevier Inc. All rights reserved.