Environmental regulation through trade: the case of shrimp

The implications of a potential ban on shrimp imports by the US from countries that do not utilize the Turtle Excluder Device on commercial shrimp nets is explored in this paper. A Linear Expenditure System (LES) was used to determine the own-price elasticities of demand for shrimp imports. The system of estimated equations was then solved for quantity levels under assumptions made about the trade restrictions, resulting in a set of prices for those import levels. These estimated prices were then used to estimate the compensating variation impact of the trade restrictions. Findings suggest that the environmental regulation would have a negative impact on US consumers, but the magnitude of that effect depends on assumptions made regarding the distribution of US imports after the trade restriction is imposed.