Trade Pessimists vs Technology Optimists: Induced Technical Change and Pollution Havens

Advances in Economic Analysis & Policy, Vol. 4, No. 2, 2004

Posted: 19 Jul 2005

See all articles by Corrado Di Maria

Corrado Di Maria

University of East Anglia

Sjak Smulders

Tilburg University - Tilburg University School of Economics and Management; University of Calgary - Department of Economics

Abstract

Our paper focuses on the role of endogenous technology and technology spillovers in explaining cross country differences in pollution and the pollution haven effect of international trade. In our North-South trade model, technology is endogenously developed by the North and imitated by the South. Environmental regulators choose national environmental policies by trading off the income gains and the disutility from a rise in pollution. Differences in environmental stringency are entirely driven by differences in investment opportunities and distortions that follow from the difference in intellectual property rights protection. We show that without goods trade and in the absence of technology subsidies, the North imposes more stringent environmental regulation than the South. When opening up to trade, the South experiences a rise in prices for pollution-intensive goods and tends to raise pollution as in a standard trade model. Induced technical change, however, may reverse this pollution haven effect.

Keywords: Pollution Havens, Endogenous Technical Change

JEL Classification: F18, O13, O33, Q21

Suggested Citation

Di Maria, Corrado and Smulders, Jacobus (Sjak) A., Trade Pessimists vs Technology Optimists: Induced Technical Change and Pollution Havens. Advances in Economic Analysis & Policy, Vol. 4, No. 2, 2004. Available at SSRN: https://ssrn.com/abstract=758224

Corrado Di Maria (Contact Author)

University of East Anglia ( email )

Norwich Research Park
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Jacobus (Sjak) A. Smulders

Tilburg University - Tilburg University School of Economics and Management ( email )

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Tilburg, 5000 LE
Netherlands
+31 13 466 2920 (Phone)
+31 13 466 3042 (Fax)

HOME PAGE: http://www.uvt.nl/webwijs/english/show.html?anr=801585&lang=en

University of Calgary - Department of Economics ( email )

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Calgary, Alberta T2N 1N4
Canada

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