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Trade, Spatial Separation, and the Environment

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Author Info
Brian R. Copeland
M. Scott Taylor

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Abstract

We develop a simple two-sector dynamic model to examine the effects of international trade in the presence of pollution-created cross- sectoral production externalities. We assume that the production of 'Smokestack' manufactures generates pollution, which lowers the productivity of an environmentally sensitive sector ('Farming'). As a result, the long run production set is non-convex. Pollution provides a motive for trade, since trade can spatially separate incompatible industries. Two identical, unregulated countries will gain from trade if the share of world income spent on Smokestack is high. In contrast, when the share of world income spent on the dirty good is low, trade can usher in a negatively reinforcing process of environmental degradation and real income loss for the exporter of Smokestack.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5242.

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Date of creation: Aug 1995
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Handle: RePEc:nbr:nberwo:5242

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Find related papers by JEL classification:
F10 - International Economics - - Trade - - - General
Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Lopez Ramon, 1994. "The Environment as a Factor of Production: The Effects of Economic Growth and Trade Liberalization," Journal of Environmental Economics and Management, Elsevier, vol. 27(2), pages 163-184, September. [Downloadable!] (restricted)
  2. Copeland, Brian R & Taylor, M Scott, 1994. "North-South Trade and the Environment," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 755-87, August. [Downloadable!] (restricted)
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  3. Rauscher, Michael, 1991. "National environmental policies and the effects of economic integration," European Journal of Political Economy, Elsevier, vol. 7(3), pages 313-329, October. [Downloadable!] (restricted)
  4. Baumol, William J & Bradford, David F, 1972. "Detrimental Externalities and Non-Convexity of the Production Set," Economica, London School of Economics and Political Science, vol. 39(154), pages 160-76, May. [Downloadable!] (restricted)
  5. Grossman, G.M & Krueger, A.B., 1991. "Environmental Impacts of a North American Free Trade Agreement," Papers 158, Princeton, Woodrow Wilson School - Public and International Affairs.
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  6. Markusen, James R, 1975. "Cooperative Control of International Pollution and Common Property Resources," The Quarterly Journal of Economics, MIT Press, vol. 89(4), pages 618-32, November. [Downloadable!] (restricted)
  7. Selden Thomas M. & Song Daqing, 1994. "Environmental Quality and Development: Is There a Kuznets Curve for Air Pollution Emissions?," Journal of Environmental Economics and Management, Elsevier, vol. 27(2), pages 147-162, September. [Downloadable!] (restricted)
  8. Ethier, Wilfred J, 1982. "Decreasing Costs in International Trade and Frank Graham's Argument for Protection," Econometrica, Econometric Society, vol. 50(5), pages 1243-68, September. [Downloadable!] (restricted)
  9. Panagariya, Arvind, 1981. "Variable Returns to Scale in Production and Patterns of Specialization," American Economic Review, American Economic Association, vol. 71(1), pages 221-30, March. [Downloadable!] (restricted)
  10. Helpman, Elhanan, 1984. "Increasing returns, imperfect markets, and trade theory," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 7, pages 325-365 Elsevier. [Downloadable!] (restricted)
  11. Copeland, Brian R & Taylor, M Scott, 1995. "Trade and Transboundary Pollution," American Economic Review, American Economic Association, vol. 85(4), pages 716-37, September. [Downloadable!] (restricted)
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  12. Markusen, James R., 1975. "International externalities and optimal tax structures," Journal of International Economics, Elsevier, vol. 5(1), pages 15-29, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Rajat Acharyya, 2009. "Southern Export of Dirty "Variety" and Optimality of Environmental Standards- Case of Consumption Pollution," Governance Working Papers 85, East Asian Bureau of Economic Research. [Downloadable!]
  2. Jota Ishikawa & Kazuharu Kiyono, 2000. "International Trade and Global Warming," CIRJE F-Series CIRJE-F-78, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
  3. Muneyuki Saito & Yasuyuki Sugiyama, 2007. "Transfer of Pollution Abatement Technology and Unemployment," Economics Bulletin, Economics Bulletin, vol. 6(5), pages 1-8. [Downloadable!]
  4. repec:eab:tradew:157 is not listed on IDEAS
  5. Yasuhiro Takarada, 2004. "Transboundary Pollution and Welfare Effects of Technology Transfer," ERSA conference papers ersa04p203, European Regional Science Association. [Downloadable!]
  6. Kenji, Kondoh, 2002. "Trans-boundary pollution and international migration," ERSA conference papers ersa02p076, European Regional Science Association. [Downloadable!]
  7. Thilo W. Glebe, 2003. "Assessing the agricultural trade and environment interaction: Taking stock and looking ahead," Discussion Papers 022003, Technische Universität München, Environmental Economics and Agricultural Policy Group. [Downloadable!]
  8. Daisuke Ikazaki & Tohru Naito, 2008. "Population, technological conversion, and optimal environmental policy," The Annals of Regional Science, Springer, vol. 42(3), pages 705-724, September. [Downloadable!] (restricted)
  9. Dirk T.G. Rübbelke & Vivekananda Mukherjee & Tilak Sanyal, 2008. "Technology Transfer in the Non-traded Sector as a Means to Combat Global Warming," Working Papers 2008.78, Fondazione Eni Enrico Mattei. [Downloadable!]
  10. Ian Coxhead & Sisira Jayasuriya, 2003. "Trade Liberalization, Resource Degradation And Industrial Pollution In Developing Countries: An Integrated Analysis," Department of Economics - Working Papers Series 884, The University of Melbourne. [Downloadable!]
    Other versions:
  11. Baksi, S. & Ray Chaudhuri, A., 2008. "Transboundary Pollution, Trade Liberalization, and Environmental Taxes," Discussion Paper 2008-78, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  12. Larry Karp, 2003. "Property rights, mobile capital, and comparative advantage," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series 942, Department of Agricultural & Resource Economics, UC Berkeley. [Downloadable!]
    Other versions:
  13. Dijkstra, B.R. & Vries, F.P. de, 2004. "Location choice by households and polluting firms : an evolutionary approach," Discussion Paper 61, Tilburg University, Center for Economic Research. [Downloadable!]
  14. Chang, Hung-Hao & Boisvert, Richard N. & Blandford, David, 2006. "The Implications of Geographic Heterogeneity for Multifunctional Rice Policy in Taiwan," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25254, International Association of Agricultural Economists. [Downloadable!]
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