This paper explores sufficient conditions for the welfare-improving environmental policy reform in the Harris-Todaro economy. A rise in the pollution tax rate in the urban manufacturing has spillover effects on the two labor market distortions: the less-than-optimal manufacturing employment and...

The author investigates the conditions under which environmental protection and trade liberalization might improve urban unemployment and welfare in a small open Harris-Todaro model with polluting urban manufacturing. While a tariff reduction decreases manufacturing employment, a rise in the...