INTERNATIONAL TECHNOLOGY TRANSFER, ENVIRONMENTAL POLLUTION AND DOMESTIC WELFARE

Licensing of foreign green technologies is not free to the home country, hence causing tradeoffs in the domestic welfare. This paper constructs a two-stage game model to explore the impact of international green technology licensing on the environment and social welfare. Results show that the total amount of pollution under licensing may be larger than that under no licensing whereas the social welfare under licensing may be smaller than that under no licensing. This implies that foreign technology transfer may not be socially preferred and harmful to the domestic environment. In addition, trade liberalization may help reduce the environmental harm when the import tariff is moderate.