Trans‐boundary pollution transmission and regional agglomeration effects

Abstract

Abstract. The purpose of this article is to analyse the effect of the externalities of industrial pollution on trade patterns and economic geography. Many researchers have studied the effects of agglomeration on regional systems. Krugman (1991) applied the monopolistic competition model to international trade and has thereby contributed to this category of inquiry. However, that study did not treat the agricultural sector as important. Similarly, environmental factors are ignored in most studies of that literature. Industrial agglomeration affects the productivities of other sectors via air pollution, water pollution, and so on. We introduce the environmental factor into the new economic geography model and analyse the effects of the environmental damage on the distribution between regions, and the effect of the environmental tax. After analysing the case without migration in the short run, we discuss the long run case in which households can move freely among regions. We derive the same equilibrium pattern of population distribution.

Krugman's Papers in Regional Science: The 100 dollar bill on the sidewalk is gone and the 2008 Nobel Prize well‐deserved

“…Second, Krugman's models have been extended to continuous space (Arbia 2001) or to more than two regions (Simonen 2006), both of which are very important from an applied point of view 22 . Last, there have been some extensions of Krugman's model to a more careful modelling of the background A ‐sector by, for example, allowing for negative external effects of manufacturing on the A ‐sector (Hosoe and Naito 2006).…”

Migration and Environment

“…Elbers & Withagen (2004) and Lange & Quaas (2007) analyze agglomeration economies, using a coreperiphery model that includes local pollution (see also Hosoe & Naito 2006). These models incorporate a direct effect on utility from the environmental bad (pollution), and skilled workers migrate according to the difference in indirect utility that they obtain in the two locations.…”

Emission reduction policy: A regional economic analysis for China

“…Nevertheless, one of the clubs is very small with only three provinces and the remaining two are reasonably similar to the standard coast-interior division. 5 An alternative to our treatment of emissions is to assume that production consumes "environmental capital" to use the expression of Hosoe and Naito (2006) so that permits to pollute are treated as a factor of production; see also, Beladi and Frasca (1996), Rosendahl (2008), Boucekkine and Germain (2009) and Chen and Groenewold (2014). 6 For a recent analysis which allows explicitly for environmental damage and which derives an optimal tax/subsidy level see Ouchida and Goto (2014).…”