Trade in Secondhand Goods and Recyclable Materials, Monitoring of Illegal Trade, and Import Quotas on Legal Trade

Abstract

This paper theoretically examines the monitoring of illegal trade, and restrictions on the legal trade, of secondhand goods and recyclable materials. We demonstrate that (a) a stricter monitoring necessarily decreases the environmental damage of the importing country as far as there are no legal imports of recyclable materials, and (b) a stricter trade restriction on legal imports increases the environmental damage of the importing country if a part of legal imports is recyclable materials and the marginal environmental damage caused by illegal trade is serious. Moreover, we investigate the policy game on the choice of monitoring probabilities between trading countries.

JEL Classification: F13, F18, Q53