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North-South trade and the dynamics of the environment, Chapter 2.2

Chichilnisky, Graciela and Abraham, Ralph and Record, Ron (1998): North-South trade and the dynamics of the environment, Chapter 2.2. Published in: Sustainability: Dynamics and Uncertainty (1998): pp. 77-108.


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This paper develops a dynamic model of North-South trade in which environment plays an important role. Our model is based on Chichilnisky North-South model for the macroeconomic interaction between two sectors of the world economy. The latter was introduced in a static context. We introduce dynamics in the original North-South model by allowing endogenous accumulation of capital. As a second extension of [1], we introduce here a variable which represents the system of property rights on the environmental asset which is used as an input to production. This could represent, for example, the property rights on forests from which wood is extracted to be used as an input to the production of traded goods or the property rights on water which is similarly used, perhaps for agricultural goods for export. The paper explains mathematically and through simulations the dynamics of a two-region world. There are two produced goods and two inputs to production. We show that as we vary the property rights of the environment the dynamics of the system changes. The less well defined are the property rights, the more chaotic are the model's dynamics.

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