AN ANALYSIS OF TRANSBOUNDARY POLLUTION AND THE GAINS FROM TRADE: RECONSIDERATION

Nobuhito Suga

Pacific Economic Review, 2007, vol. 12, issue 2, 225-235

Abstract: Abstract. This paper investigates the effects of transboundary pollution on trade and welfare in a two‐country, two‐good, one‐factor model in which pollution is treated as a negative cross‐industry externality. It is shown that trade may improve countries’ natural environment and consequently raises the countries’ welfare if a comparative advantage in a pollution‐producing good is held by a country that greatly surpasses the other in pollution abatement technology. This result has not been obtained from existing models of this type.

Date: 2007
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