The Pollution Haven Hypothesis, a Dynamic Perspective
In this paper we build a model to investigate the relation between trade and the environment in a dynamic setting. We extend a trade model similar to Copeland & Taylor (2003) by adding capital accumulation. We characterize optimal environmental policy in autarky and under international trade. Then we analyze the effects of parameter differences across countries on steady state specialization patterns. JEL Codes: F18, F43, O41, Q56.