Environment, trade and the welfare gains from the transfer of pollution abatement technology

We analyse in this article the welfare effect of trade and environmental technology transfer from a developed country to a developing country. We use a two-country, two-sector and two-factor Ricardian general equilibrium model. The two industries are manufacturing and agriculture, and the pollution emitted from the manufacturing industry decreases the natural environment useful to agricultural production. We consider two cases. In the first case pollution in each country is local. In filethe second case pollution in one of the two countries is global. We analyse each case separately and obtain the following results. In the first case the developed country may be worse off if technology is transferred to the developing country. In the second case such a paradox never occurs. Copyright Springer-Verlag Berlin/Heidelberg 2003