TY  - JOUR
AU  - Copeland,Brian R.
AU  - Taylor,M. Scott
TI  - Trade, Spatial Separation, and the Environment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5242
PY  - 1995
Y2  - August 1995
UR  - http://www.nber.org/papers/w5242
L1  - http://www.nber.org/papers/w5242.pdf
N1  - Author contact info:
Brian Copeland
Department of Economics
The University of British Columbia
#997-1873 East Mall
Vancouver, BC  V6T 1Z1 CANADA
E-Mail: copeland@econ.ubc.ca

M. Scott Taylor
IEE Canada Research Chair
Department of Economics
The University of Calgary
2500 University Drive, N.W.
Calgary, AB T2N 1N4
CANADA
Tel: 403/220-8912
Fax: 403/282-5262
E-Mail: mstaylor@ucalgary.ca
AB  - 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.
ER  -