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A Simple Model of Trade, Capital Mobility, and the Environment

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  • Brian R. Copeland
  • M. Scott Taylor

Abstract

This paper examines the interaction between relative factor abundance and income-induced policy differences in determining the pattern of trade and the effect of trade liberalization on pollution. If a rich and capital abundant North trades with a poor and labor abundant South, then free trade lowers world pollution. Trade shifts the production of pollution intensive industries to the capital abundant North despite its stricter pollution regulations. Pollution levels rise in the North while those in the South fall. These results can be reversed however if the North-South income gap is "too large," in this case, the pattern of trade is driven by income-induced pollution policy differences across countries. Capital mobility may raise or lower world pollution depending on the pattern of trade.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5898.

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Date of creation: Jan 1997
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Publication status: published as "North-South Trade and the Environment", Quarterly Journal of Economics, Vol.109, no.3 (1994): 755-787.
Handle: RePEc:nbr:nberwo:5898

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  1. Copeland, Brian R & Taylor, M Scott, 1995. "Trade and Transboundary Pollution," American Economic Review, American Economic Association, American Economic Association, vol. 85(4), pages 716-37, September.
  2. Daly, Herman & Goodland, Robert, 1994. "An ecological-economic assessment of deregulation of international commerce under GATT," Ecological Economics, Elsevier, Elsevier, vol. 9(1), pages 73-92, January.
  3. Copeland, Brian R & Taylor, M Scott, 1994. "North-South Trade and the Environment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(3), pages 755-87, August.
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Cited by:
  1. Jie HE, 2005. "Economic Determinants for China’s Industrial SO2 Emission: Reduced vs. Structural form and the role of international trade," Working Papers 200505, CERDI.
  2. Svetlana Batrakova & Ronald B Davies, 2010. "Is there an environmental benefit to being an exporter? Evidence from firm level data," Working Papers, School Of Economics, University College Dublin 201007, School Of Economics, University College Dublin.
  3. Roberto Burguet & Jaime Sempere, . "North-South Environmental Debate: Strategic Price Distortions And Capital Flows," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 442.99, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  4. Brian R. Copeland & M. Scott Taylor, 2004. "Trade, Growth, and the Environment," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 42(1), pages 7-71, March.
  5. Jie HE, 2008. "Foreign Direct Investment And Air Pollution In China: Evidence From Chinese Cities," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 28, pages 131-150.
  6. CHANDER, Parkash & KHAN, Ali, 1999. "International treaties on trade and global pollution," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1999003, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Arief Anshory Yusuf, 2005. "Who Pay for the Cleaner Air? Distributional Impact of Environmental Policy in a Dualistic Economy," Working Papers in Economics and Development Studies (WoPEDS), Department of Economics, Padjadjaran University 200502, Department of Economics, Padjadjaran University, revised Feb 2005.
  8. Ren, Shenggang & Yuan, Baolong & Ma, Xie & Chen, Xiaohong, 2014. "International trade, FDI (foreign direct investment) and embodied CO2 emissions: A case study of Chinas industrial sectors," China Economic Review, Elsevier, Elsevier, vol. 28(C), pages 123-134.
  9. Beladi, Hamid & Chao, Chi-Chur & Frasca, Ralph, 1999. "Foreign investment and environmental regulations in LDCs," Resource and Energy Economics, Elsevier, Elsevier, vol. 21(2), pages 191-199, May.
  10. Ferrara, Ida & Missios, Paul & Murat Yildiz, Halis, 2009. "Trading rules and the environment: Does equal treatment lead to a cleaner world?," Journal of Environmental Economics and Management, Elsevier, vol. 58(2), pages 206-225, September.
  11. Meeta K. Mehra, . "North-South Capital Movement and Global Environment," Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi Discussion Papers, Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi, India 09-12, Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi, India.

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