Sustainable Development and International Distribution: Theory and Application to Rainforests.

A situation is analyzed in which two countries negotiate the financing of costs that accrue if one of them switches onto a sustainable development path. The other country's incentive to pay arises as it benefits from the developing country's environmental resources, but at an ever declining rate as long as development remains nonsustainable. In an application to the protection of tropical rainforests it is shown that North to South redistribution of welfare would be substantial, yet the North would still gain enormously in efficiency terms. An explanation is given of why the Rio Conference failed in terms of rainforest protection. Copyright 1996 by Blackwell Publishing Ltd.