Trade, Growth, and Environmental Quality*

Abstract

This paper examines linkages between international trade, environmental degradation, and economic growth in a dynamic North-South trade game. Using a neoclassical production function subject to an endogenously improving technology, North produces manufactured goods by employing labor, capital, and a natural resource that it imports from South. South extracts the resource using raw labor, in the process generating local pollution.We study optimal regional policies in the presence of local pollution and technology spillovers from North to South under both non-cooperative and cooperative modes of trade. Non-cooperative trade is inefficient due to stock externalities. Cooperative trade policies are efficient and yet do not benefit North. Both regions gain from improved productivity in North and faster knowledge diffusion to South regardless of the trading regime.r oie_800 906..926

Optimal Environmental Policy under Endogenous Terms of Trade and Economic Growth

“…2 See, for example, [4] and [5] for a previous discussion of these arguments. 3 Note that the maximization problem is discomposed into the temporal solution, involving the choice of those goods that maximizes the subutility function at each period of time, and the intertemporal solution, concerning the stream of consumption that maximizes the present value of the utility. 4 That is,…”

“…In the last two decades many studies have tried to explain the existing trade-offs among economic growth, international trade, and the environment (see, for example, [1]- [3]). However, from a theoretical perspective, their main results were based on economic models in which the terms of trade were defined as an exogenous variable.…”

Foreign Aid, Government Spending, and the Environment

“…We will first examine the decision of the household. Following Chen et al (2003) and Sirakaya et al (2009), we assume that the household treats the pollution stock as a given variable. Therefore, the household chooses consumption C to maximize its utility in subject to the budget constraint in , given the initial stocks of capital as well as the income tax rate and the lump‐sum transfer.…”

US Ethanol Trade Policy: Pollution Reduction or Domestic Protection

“…Furthermore, environmental concerns are intensively debated and/or addressed in trade negotiations (Daly and Goodland, ). More recent studies have examined the trade and environmental link under imperfect competition and game‐theoretic framework (Sirakaya et al, ;Yanase, ).…”