Developing countries with comparative advantage in dirty industries face the risk of environmental degradation unless appropriate policy is implemented to curtail industrial emission. Using applied general equilibrium analysis, we examine how trade influences the transfer of environmental...

This paper develops a new international trade model with capital market imperfections and endogenous borrowing costs in general equilibrium. A key element of our model is that firm heterogeneity arises from the interaction of credit constraints at the firm-level with financial frictions at the...