This paper studies Krugman's (1991) core-periphery model and extends it to include environmental pollution. We present … local environmental pollution, a third and more realistic type of equilibrium may occur in which most of the manufacturing …

there is no perfectly clean technology that eventually solves the pollution problem once and for all. New technologies have … stings attached, i.e. each emits a specific stock pollutant. Damages are convex in individual pollution stocks but additive … across stocks, creating gains from diversification. The research and pollution policies are tightly linked in such a setting …

the relationships between population development, economic dynamics and environmental pollution are complex due to various … long-run steady state is optimal that is characterized by a stable pollution stock, and by population and economic growth …

the new technology may turn out to generate a new pollution problem. R&D may therefore be optimally undertaken more than … once. Using and externding recent results from multi-stage optimal control theory, we provide a full characterization of … the optimal pollution and R&D policies. The optimal R&D program is strictly sequential and has an endogenous stopping …