Trade liberalization, resource degradation and industrial pollution in developing countries

Environmental damage is in reality many different types of phenomena, each with a unique set of causes and characteristics. We present an analytical model identifying intersectoral and interregional links of economy and environment and explore consequences of trade policy and world price changes. The model contains explicit spatial and institutional features relevant to developing economies. We show that similar trade or policy shocks can have different effects, depending on initial economic structure, trade orientation and policies. Further, when there is more than one sectoral source of environmental damage, a policy or price shock may have unexpected environmental and welfare results.