Global Warming and R&D-Based Growth in a Trade Model between Environmentally Sensitive and Environmentally Neglectful Countries

ABSTRACT The paper analyzes a bipolar world in which one region disregards global warming, while the other acknowledges the two-sided link between production and the emissions and concentration of pollutants in the atmosphere. Productive activities are negatively affected by global warming, provoke emissions, and make use of intermediate inputs and forest products as inputs. The environmentally-unconcerned forest region trades forest products in exchange for technology developed in the environmentally-concerned technologly leading region. Trade is the transmission channel for economic growth. Trade also serves to transmit the willingness to reduce emissions from the environmentally-concerned region to the unconcerned region, so turning around the carbon leakage problem. Furthermore, a global reduction in emissions does not necessarily lead to a reduction in the speed of growth