We seek to explain the emergence of spatial heterogeneity regarding development and pollution on the basis of … endogenous growth and convergence behavior, and pollution accumulation in each country with pollution diffusion between countries … capital and pollution rates of flow, spatial heterogeneity emerges even between two economies with identical fundamental …

We build a two regions general equilibrium model with cross-border pollution and either international or only inter …-regional capital mobility. To control pollution each region uses public pollution abatement and issues either intra-regionally or inter … emission permits and we examine when and how cross-border pollution and the type of capital mobility affect these equilibrium …