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Economic Development and Environmental SustainabilityNew Policy Options$
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Ramón López and Michael A. Toman

Print publication date: 2006

Print ISBN-13: 9780199298006

Published to Oxford Scholarship Online: September 2006

DOI: 10.1093/0199298009.001.0001

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Trade and the Environment in Developing Economies

Trade and the Environment in Developing Economies

(p.178) 6 Trade and the Environment in Developing Economies
Economic Development and Environmental Sustainability

López Ramón

Michael A. Toman

Oxford University Press

This chapter studies the relationship between international trade, capital mobility, and environmental quality in developing countries. Although the ‘pollution haven hypothesis’ has dominated much of the discussion of the composition effects of trade between rich and poor countries, this paper argues that it is not supported by empirical evidence. Regardless of environmental policy, trade liberalization may still shift the development path towards environmentally-intensive activity in countries with a comparative advantage in this area. This paper also considers the fundamental differences between environmental problems associated industrial pollution emissions, and those that affect stocks of natural capital, such as fisheries and forests. In addition, it examines the effects of linkage between trade policies and environmental concerns in developing countries. Section 1 discusses the role of the environmental policy process and institutions, and how they interact with the trade regime. Section 2 reviews the empirical evidence on the effects of environmental policy on trade patterns, and the evidence on the effect of trade on environmental quality. Section 3 considers policy issues.

Keywords:   international trade, trade pattern, environmental policy, pollution haven effects, political economy, property rights, capital flows, policy regimes, institutions

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