Environmental Product Standards in North-South Trade

One channel through which environment is damaged is consumption. To protect environment, various product standards are introduced all over the world. By using a new economic geography framework, this paper explores the effects of environmental product standards on environment in a North-South trade model. We examine a situation in which North unilaterally introduces an environmental product standard. Specifically, those products that do not meet the standard are not allowed to be sold in the North market. We find that such a standard may worsen North environment but improve South environment through firm relocation.