North-South Trade and Pollution Migration: The Debate Revisited

The paper examines the effect of freer North-South trade in goods on pollution, commodity terms-of-trade and national welfare, utilizing a factor endowment framework. North and South are distinguished in terms of the relative endowment of a pollution causing natural resource: South is relatively mor...

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Bibliographic Details
Published in:Environmental & resource economics 2008-05, Vol.40 (1), p.139-164
Main Authors: Mehra, Meeta K, Das, Satya P
Format: Article
Language:English
Subjects:
Commodities
Consumption
Economic models
Economic Policy
Economic statistics
Economic theory
Economics
Economics and Finance
Endowment
Environmental Economics
Environmental Law/Policy/Ecojustice
Environmental Management
Environmental policy
Environmental quality
Equilibrium
Free trade
International agreements
International trade
Migration
Natural resources
North-South relations
Pareto efficiency
Pollution
Pollution control
Studies
Tariffs
Terms of trade
Trade relations
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Summary:The paper examines the effect of freer North-South trade in goods on pollution, commodity terms-of-trade and national welfare, utilizing a factor endowment framework. North and South are distinguished in terms of the relative endowment of a pollution causing natural resource: South is relatively more resource abundant. Compared to the analysis of Copeland and Taylor (1994)--which is the central work so far on this subject--this paper internalizes the commodity terms-of-trade impact of individual environment policies. It is derived that if countries specialize completely in the free-trade equilibrium, both are induced to reduce their pollution as compared to autarky. It is interesting and paradoxical that the South also reduces its pollution, despite specializing in the pollution-intensive good. Again, contrary to common perception, free trade may entail an overall terms-of-trade loss for the North, while South will always have a positive change in the terms-of-trade. Finally, inspite of better environment, free trade may cause both the countries to gain or lose in terms of aggregate welfare.
ISSN:0924-6460
1573-1502
DOI:10.1007/s10640-007-9145-0