NORTH-SOUTH TRADE AND THE ENVIRONMENT

A simple static model of North-South trade is developed to examine lin kages between national income, pollution, and international trade. Two countries produce a continuum of goods, each differing in pollution i ntensity. We show that the higher income country chooses stronger envi ronmental protection, and specializes in relatively clean goods. By is olating the scale, composition, and technique effects of international trade on pollution, we show that free trade increases world pollution ; an increase in the rich North's production possibilities increases p ollution, while similar growth in the poor South lowers pollution; and unilateral transfers from North to South reduce worldwide pollution.