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<p>This paper examines the trade between resource-scarce and resource-abundant countries in a two-sector dynamic setting in which the harvesting and manufacturing sectors exert damaging pressures on the nationally owned renewable resources in a South-South trade model, given the relative demand levels. The relative strength of world demand yields striking results, contrary to expectations in two cases. In the conventional case, although the resource-scarce country exports pollution-producing goods, it experiences welfare gains and stock rebuilding when the world’s relative demand for “dirtier” goods is low. Strikingly, in the original case in which the world’s relative demand for polluter goods is high, even if the resource-scarce country exports “cleaner” goods, it can suffer a loss in welfare and environmental degradation at the diversified steady-state equilibrium. This model provides a theoretical basis for “protectionism” by supporting the <i>trade-induced degradation hypothesis</i> in a world with a high enough relative demand for pollution-producing goods.</p>

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Open Access Renewable Resources, Industrial Pollution, and International Trade: Connecting Different Ranges of Preferences to Welfare Implications

  • 期刊论文

  • 发表日期：

    2025年4月22日

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  • Gökhan Güven

摘要

This paper examines the trade between resource-scarce and resource-abundant countries in a two-sector dynamic setting in which the harvesting and manufacturing sectors exert damaging pressures on the nationally owned renewable resources in a South-South trade model, given the relative demand levels. The relative strength of world demand yields striking results, contrary to expectations in two cases. In the conventional case, although the resource-scarce country exports pollution-producing goods, it experiences welfare gains and stock rebuilding when the world’s relative demand for “dirtier” goods is low. Strikingly, in the original case in which the world’s relative demand for polluter goods is high, even if the resource-scarce country exports “cleaner” goods, it can suffer a loss in welfare and environmental degradation at the diversified steady-state equilibrium. This model provides a theoretical basis for “protectionism” by supporting the trade-induced degradation hypothesis in a world with a high enough relative demand for pollution-producing goods.