Growth, Trade and Sustainability in the Spatial Economy

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The interaction between environmental quality, economic activity and growth does not take place in a wonderland of no geographical dimensions, but is shaped in a mutually interacting spatial system of cities, regions and countries. Consequently, regional differences in land use, economic structure, consumption, technology and environmental policy incentives impact on the environmental sustainability of an interacting global-regional system. This paper addresses the issue of environmental quality in the context of economic growth in a non-spatial economy. Spatial economic dimensions have received relatively little attention in the debate on global change, long-run growth and international trade. The present paper deals with a formalization of spatial environmental quality, from a behavioural and policy perspective, and in particular with the relationship between economic performance and environmental sustainability of a multi-regional system. The analysis is-for the sake of illustration-based on a model of two interactive regions. These regions enclose a local economy and a local environment, which directly interact. The local economies are linked through trade, while the local environments are linked through the global environment. A wide array of numerical simulation results are presented that show developments of symmetric and asymmetric regions under various scenarios. Evaluation is based on summary indicators which may be considered to play the role of welfare variables. The approach here may be considered illustrative for a class of models that combine elements of economic growth theory, bioeconomics, general equilibrium theory and theories of policy coordination. Elements of a research agenda are presented in a concluding section.
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Growth, Trade and Sustainability in the Spatial Economy

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