Trade, Spatial Separation, and the Environment / Brian R. Copeland, M. Scott Taylor.

Format:

Book

Author/Creator:

Copeland, Brian R.

Contributor:

National Bureau of Economic Research.

Taylor, M. Scott.

Series:

Working Paper Series (National Bureau of Economic Research) no. w5242.

NBER working paper series no. w5242

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1995.

Summary:

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.

Notes:

Print version record

August 1995.