exporting toxic waste

Pergamon Socio-Econ. Pkmn. Sci. Vol. 29, No. 3, pp. 187 195. 1995

Copyright c" 1995 Elsevier Science Ltd 0038-0121(95)00009-7 Printed in Great Britain. All rights reserved

0038-0121/95 $9.50 + 0.00

Exporting Toxic Waste

ROBERT E. KOHN Department of Economics, Southern Illinois University at Edwardsville, Edwardsville,

IL 62026, U.S.A.

Abs t rae~There is concern that developing countries are victimized by international trade in toxic wastes. A Heckscher~Ohlin Samuelson model demonstrates that a Pigouvian tax on untreated wastes can correct for the attendant externalities. When each country imposes the tax on waste stored within its jurisdiction, at a rate equal to the expected marginal damage to its own citizens, and then distributes the tax revenue to its own citizens in such a way that every household is fully compensated for the impending toxic risk, then all citizens in all countries benefit from free trade in toxic waste.

INTROD U CTIO N

An internal memo to colleagues by Lawrence Summers [29], Vice President and Chief Economist of the World Bank, was obtained by The Economist, and though presumably confi- dential, was published under the pejorative title: "Let Them Eat Pollution." Because the demand for a clean environment is income-elastic, Summers argues that " . . . the economic logic behind dumping a load of toxic waste in the lowest-wage country is impeccable." In contrast to Summers' call for transfers of waste from polluted, industrial countries to "under-polluted" developing countries, the Clinton administration is proposing a ban on the export of hazardous waste to developing countries.t "Citizens in other countries should not be asked to bear the burden of U. S. pollution" insists EPA administrator, Carol Browning [19].

The present paper supports Summers' thesis, provided that: (1) the inhabitants of recipient nations have full knowledge of the hazards to which they are exposed; (2) the storage of toxic wastes is Pigouvian-taxed in both countries; and (3) the tax revenue is distributed in such a way that the benefits of trade tangibly accrue to all individuals exposed to the imported toxic waste.

Summers' [29] thesis is supported here by three simulation models. In the first, a relatively poor country has a comparative advantage in waste disposal. In the second model, neither the poor country nor a relatively rich country has a comparative advantage in waste disposal, but the lower marginal rate of substitution of consumption for stored waste in the poorer country, prior to trade, causes that country to specialize in waste disposal. In the third model, it is the country with more resources that has the comparative advantage in waste disposal. However, the lower marginal rate of substitution of goods for waste in the less endowed country domi- nates, and, again, that country imports waste. In all three of these models, the relatively poor country is better off trading than not trading, even though it specializes in waste disposal and stores larger amounts of untreated waste. This common result holds because the lower income of the poorer country reduces its relative willingness to pay to avoid the storage of waste within its borders.

The second and third models, in which a country specializes in waste disposal because of its relative poverty, are most reflective of the Summers' memo. In that same vein, Summers [29] goes on to suggest that the long-term dangers of toxic wastes are relatively less in developing countries because people are more likely to die early from poverty-related diseases. Whether or not that is true, it implies an unacceptable level of inequality as a precondition for trade. Fortunately, such an argument is not needed in the present paper.

t ' q n 1988, the U.S. exported roughly 150,000 tons of hazardous waste. Of this amount 85 percent was sent to Canada, 8 percent was sent to Mexico, and the remainder went to Western Europe, Japan or Brazil" [21, p. 43].

187

188 Robert E. Kohn

Summers [29] is not the first to advocate free trade in toxic wastes. Copeland [5], Dean [7], Oates [22] and others show that if wastes are properly taxed, importing as well as exporting countries gain from trade. The present paper adds to that literature, with a model in which the storage of untreated wastes affects the relative cost of waste disposal. Whereas, welfare-economic models generally affirm policies in which there is simply the potential for redistributing benefits so that every individual can be better off, the present paper makes such redistributions mandatory.

In the next section, we present the simulation model and the conditions for efficiency under autarky, a state in which countries choose not to trade. Autarky equilibria are simulated for the three cases of interest. Subsequently, the corresponding free trade equilibria are simulated, and it is demonstrated that both the importing and exporting countries are better off under free trade than under autarky. Although each case is predicated upon a different country (or neither country) having a technological comparative advantage in waste disposal, the results are qualitatively identical because of the overriding income effect.

In the conventional "strong version" of the Heckscher-Ohlin-Samuelson model [15], there are two desirable goods, preferences for them are homothetic (that is, when quantities of both goods increase in the same proportion, the marginal rate of substitution in consumption does not change), and there is a unique solution in which each country consumes the two goods in the same ratio. In the numerical models simulated here, there is one desirable good and one undesirable good (stored toxic waste), and preferences are nonhomothetic. However, there is a unique solution nevertheless, and the ratio of waste stored in the two countries is equal to the inverse ratio of the quantities of the good consumed.

THE SIMULATION MODEL AND A U TA RK Y

Each country in this model has fixed quantities of labor Lo and of capital Ko, which are allo- cated between an industry that produces a desirable good y along with an undesirable bypro- duct, toxic waste, and a second industry that safely disposes of D units of toxic waste. The respective linear-homogeneous production functions of the two industries are:

Y= Y(Lr, Kr) = 180(36°l)L~3K°f (1)

and

D = D(Lo, Ko) = (22.5)(24°l)L~7K~3. (2)

Observe that the two technologies are intensive in different inputs. Because the total quantity of each input is fixed, the relative cost of waste disposal increases with the quantity treated. It is therefore optimal to leave some waste untreated and then to store it. That the cost of waste disposal increases with the quantity of waste treated drives some of the results of the present model.

It is assumed that: (1) stored, untreated waste adversely affects the utility of households because of the risk of air, groundwater and soil contamination [16]; and (2) households have accurate knowledge of the quantity of waste stored within their country as well as the risk of morbidity and premature mortality to which they are accordingly exposed. Preferences in each country are represented by a community utility function,

U= U(y, w) = I n ( y ) - 100~b06 ' (3)

where w is the quantity of toxic waste that is stored (not treated). In this model, it is only the storage of waste, not its treatment, that causes disutility. Under autarky,

y = Y and w = o t Y - D . (4)

Observe that the upper case letters in (4) refer to quantities produced whereas the lower case letters denote quantities consumed. In the absence of trade, y simply equals Y. The derivative Ur is positive, Uvy, Uw and Uww are negative, and the waste coefficient ~ is a fraction equal to 0.1.

Exporting toxic waste 189

The marginal conditions for an interior optimum are derived by setting the derivatives of the Lagrangian,

E. = U( y, w) + L[ y - Y(Ly , Ky)] + t z [ w - otY(Lr, Ky) + D(LD, KD)]

+F[Lo - L y - LD] + 8[Ko - K y - Ko], (5)

with respect to all of the variables, equal to zero, and solving simultaneously to eliminate the Lagrangian multipliers. This yields the well-known equality of producers' marginal rates of technical substitution,

DL 7KD YL 3Ky . . . . (6)

Dr. 3LD YK 7Ly '

along with the equality of consumers' marginal rates of substitution (of the desirable good for untreated hazardous waste) and the corresponding marginal rate of transformation,

Uw 2wy YL 1 YK

- - - - [ 7 ( K o / L D ) °3 "] = Ot YK + DK" (7) Uy (100,000) 2 otYc + Dc 0.1 -J- L z 4 ( K r / L r ) O . 7 ( l . 5 ) o . , J

The meaning of (7) is as follows. The quantity of good y that compensates the community for the marginal unit of untreated hazardous waste stored in its environment is the quantity of good y that can be produced with the marginal unit of labor, Y/_, divided by the sum of the ad- ditional waste created when that quantity of y is produced, which is ~Yc, plus the increase in waste, D/., caused by shifting the marginal unit of labor away from waste disposal. Another interpretation of (7) is that - - [ U w / U y ] / Y L , which is the marginal damage or disutility measured in units of labor, equals 1/(~Y/. + DL), which is the marginal cost in labor units of disposing of the hazardous waste.

The above optimum is achieved in a competitive market economy when the government imposes on firms in industry y a Pigouvian tax q~ on uneliminated, stored waste, equal to the sum that households are willing to pay to have the marginal unit eliminated. This tax, which is the equivalent of marginal pollution damage in Ref.[31], and which relates to households' willingness to pay to avoid living near stored toxic wastes [28], is

This formulation of the tax adds an interesting complication because the equilibrium price of good y, which is pr , is in part a function of itself. The formula for p r is derived as follows. The total profit of industry y is

rrr = Pr Y(Lr , Kr) - JrLr - p K r - pDD -- dp[ot Y - D], (9)

where n and p are the unit costs of labor and capital, respectively, and PD is the competitive price charged for waste disposal by the treatment industry. In accord with Ref.[3], the Pigouvian tax is necessarily on untreated waste [ ~ Y - D ] not on output Y nor on gross waste ~Y.

The marginal condition for the maximization of (9) with respect to Ly is 7~

py = ~ + ~ . (10)

Substituting (8) into (10) yields

p y = r~[ (100' 000)27r (11) - -

1 + ot ~ 54(360A) ([100,000] 2 - [0.2]wy)

Taking the derivative of (9) with respect to D yields

PD = ~b, (12)

190 Robert E. Kohn

which states that firms in industry y send their toxic waste to industry D until the rising price of disposal by treatment Po equals the tax ~b, for not doing so; that is, for storing the waste in ponds or tanks on their own premises.

From the total profit function for industry D, it can similarly be shown that the competitive price of waste disposal equals its marginal cost,

[ L \ 0 . 3

PD -- Dc -- 63(24 °1) "

Combining (8), (11), (12) and (13) yields

Jr zr U w

(13)

(14)

which can be expressed alternatively in terms of YK and DK, and can be reformulated to confirm that efficiency conditions (6) and (7) are satisfied by competitive markets and the imposition of the Pigouvian tax defined in (8). To avoid the complicating, though realistic, dynamics of long- lived wastes accumulating over time [14,27], it is assumed that untreated wastes naturally degrade at the end of each production period.

The optimal equilibria for three autarky cases are simulated and the rounded solutions listed in Tables 1-3. In each of these simulations, the endowments of the country with more (m) of both resources are L~ = 10,000 and K~ = 15,000. In Case 1, the endowments of the country with smaller (s) amounts of both resources are L~ ~- 8000 and K~9 = 10,000. Because L'~o/K~o is greater than L'~/K'~, the country with the smaller endowment has a relative abundance of the particular input Lo, in which waste disposal is intense. In Case 2, the endowments of the country with the smaller amounts of resources are L~ = 8000 and K~ = 12,000, but, because L~o/K~ = L'~/K'~, neither country has a relative abundance of the critical input Lo and therefore neither country has a technological comparative advantage in waste disposal. This approach, in which two countries differ only in their endowments is also used in the model of Copeland and Taylor [6].

Alternatively, in Case 3, L'~ = 2000 and K'~ = 4000, so that the country with more of both resources now has the relative abundance of Lo. Although this model is based on conventional labor and capital inputs, Lo can proxy for that input in which waste disposal is actually intensive. It could be labor or land or what Dean [8, p. 15] calls the "relatively large assimilative capacity" of some developing countries to absorb wastes. It may also be the case that waste disposal is a technology-intensive activity [12], which would justify Case 3.

Table I. Autarky and Heckscher-Ohl in Samuelson equilibria when the country with a smaller endowment has a comparat ive advantage in waste disposal"

Country with more resources Country with smaller resources

Heckscher~Ohlin Heckscher -Ohl in- Autarky Samuelson Autarky Samuelson

v r 0 - 194,551.400 0 194,551.400 ]1 ' r 0 - 40,486.610 0 40,486.610 L y 3224.291 3811.581 2843.580 2241.054 Ky 10,822.650 11,554.380 7501.508 6793.503 Y 1,938,504.000 2,133,816.000 | ,444,330.000 1,254,597.000 y 1,938,504.000 1,939,264.000 1,444,330.000 1,449.148.000 Lo 6775.709 6188.419 5156.420 5758.946 KD 4177.348 3445.621 2498.492 3206.497 D 181,193.300 160,505.400 128,277.600 149,366.400 w 12,657.050 12,389.570 16,155.400 16,579.840 U 14.461410 14.462470 14.157060 14.159000 PD = q~ 53.421310 55.079750 57.424800 55.079750 Pv 10.886430 11.462220 12.305110 11.462220 p 695.148000 769.724600 884.491400 769.724600 - Uw/Ur 4.907149 4.805328 4.666745 4.805328 Yc/(~ YL + DL ) 4.907149 4.805328 4.666745 4.805328 y r / w r - - 4.805328 - - 4.805328

"L~ = 10,000 and K ~ = 15,000; L}) = 8000 and K b = 10,000; ~z= 1000.


Table 2. Autarky and Heckscher-Ohlin-Samuelson equilibria when neither country has a comparative advantage in waste disposal"


Heckscher~Ohlin - Heckscher-Ohlin- Autarky Samuelson Autarky Samuelson

v T 0 - 14,756.070 0 14,756.070 w r 0 -3011.713 0 3011.713 L)- 3224.291 3266.009 2654.743 2612.807 K~. 10,822.650 10,879.770 8760.264 8703.816 Y 1,938,504.000 1,953,178.000 1,577,144.700 1,562,542.000

3' 1,938,504.000 1,938.422.000 1,577,144.700 1.577,298.000 LD 6775.709 6733.991 5345.257 5387.193 Ko 4177.348 4120.229 3239.736 3296.184 D 181,193.300 179,668.100 142,211.400 143,734.400 w 12,657.050 12,638.010 15,503.030 15,531.490 U 14.461410 14.461413 14.247090 14.247100 po = ~ 53.421310 53.543120 53.695270 53.543120 P r 10.886430 10.928150 10.980390 10.928150 p 695.148000 700.445500 707.102070 700.445500 -- Uw/Ur 4.907149 4.899560 4.890106 4.899560 YL/(~YL + DL) 4.907149 4.899560 4.890106 4.899560 yr/wr 4.899560 - - 4.899560

~L~ = 10,000 and K~ = 15,000; L~ =8000 and K~ = 12,000; rr = 1000.

The autarky solutions in Tables 1-3 are obtained with a computer program that maximizes the objective function (3), subject to the technical and resource constraints for either country. Each optimal solution is identical to the competitive market equilibrium that obtains when the government imposes a tax ~b on toxic waste stored within its borders. The tax revenue is distributed to households in lump sums so that the gross national income in each country, rtLo + pKo + Ow, equals the gross national product pry in the same country. The wage rate rc in the numerical simulations is equivalent to 1000 units o f some c o m m o n currency. It remains to be demonstrated that, in all three cases, both countries are better off (which means that every citizen in each country is better off) with free trade in toxic waste than they would be under the corresponding autarky equilibrium.

H E C K S C H E R - O H L I N - S A M U E L S O N EQUILIBRIA

Because each country uses identical technologies and has identical preferences, there is a unique free-trade equilibrium for each endowment of resources. This equilibrium, in which the country with more of both resources exports yV units of good y and w r units o f waste to the

Table 3. Autarky and Heckscher-Ohlin-Samuelson equilibria when the country with more resources has a comparative advantage in waste disposal ~'


Heckscher~Ohlin Heckscher Ohlin- Autarky Samuelson Autarky Samuelson

y r 0 -18,458.490 0 18,458.490 w r 0 - 3768.844 0 3768.844 Lr 3224.291 3276.545 1081.224 1023.745 Kr 10,822.650 10,894.060 3459.976 3403.812 Y 1,938,504.000 1,956,863.000 628,678.500 611,415.200

y 1,938,504.000 1,938,405.000 628,678.500 629,873.700 Ln 6775.709 6723.455 918.776 976.255 Ko 4177.348 4105.940 540.024 596.188 D 181,193.300 179,284.300 24,220.010 26,032.320 w 12,657.050 12,633.200 38,647.850 38,878.050 U 14.461410 14.461420 13.202010 13.202120

p n = ~ 53.421310 53.573780 54.192260 53.573780 Pr 10.886430 10.938670 11.152010 10.938670 p 695.148000 701.783500 729.15440 701.783500 -Uw/Ur 4.907149 4.897652 4.859414 4.897652 YL/(~YL+DL) 4.907149 4.897652 4.859414 4.897652

3,~w r - - 4.897652 - - 4.897652

UL'~= 10,000 and K~ = 15,000; L~ = 2000 and K~, =4000; n = 1000.

192 Robert E. Kohn

country with smaller quantities of resources, is called "the strong version" of the Heckscher- Ohlin-Samuelson model [18, p. 114]. Net consumption in each country, after trade, is

y = y+yT and w = ( O . 1 ) Y - D + w T, (15)

where yr and w r are negative for the exporting country and positive for the importing country, and ~, the fraction of output that becomes waste, is 0.1. As in the preceding section of the paper, it is assumed that each country taxes its own firms storing toxic waste on their premises at a rate equal to py[Uw/Uy] per unit of waste, and that the tax revenue is redistributed in lump sums to its own citizens.

The Heckscher-Ohlin Samuelson [24-26] solution is characterized by the equality of marginal rates of technical substitution (6) and by the equality of marginal rates of substitution in consumption (7) across countries as well as within countries, and by the equality,

yr ck 2wy w - - ~ - p Y - ( 1 0 0 , 0 0 0 ) 2 ' ( 1 6 )

where yr/wr, the equilibrium terms of trade, equals the ratio of prices. The usual assumption that the transport of goods is costless carries over in this model to the broader assumption that the transport of toxic waste is not only costless but poses no danger.

The Heckscher-Ohlin-Samuelson solution in each table is derived with a computer search for that particular allocation in which the above three equalities hold. The advantage of free trade in toxic waste is confirmed for the three scenarios underlying Tables 1-3. For each country, community utility is higher under trade than under the corresponding autarky. When the Pigouvian tax revenue is appropriately distributed to citizens within the country in which the revenue is collected, every household, whether or not its exposure to toxic waste is increased or decreased, is better off because of free trade.

In each of the three cases simulated in this paper, the relative price of waste disposal Po/PY and the relative Pigouvian tax on stored waste ck/py are lower in the country with the smaller amounts of resources. Consequently, there are gains to trade for that country if it imports quantities of good y and waste in a ratio that exceeds the ratio of the autarky prices, Po/P.,.. For then the total value of good y received exceeds the total value of the waste disposal and storage services that it supplies. Likewise, the country with more resources is better off if it exports good y and waste in a ratio that is less than its autarky price ratio PD/Py for the waste disposal and storage services that it receives have a greater total value than that of the good that it exports.

As a consequence of trade, the relative price of waste disposal and the relative marginal damage of untreated waste decline for the country with more resources, increase for the country with less resources, and are ultimately equalized. The unique terms of trade that make both countries better off and satisfy the Heckscher-Ohlin-Samuelson conditions are listed in the final rows of each table.

The results of the numerical simulations are presented in Tables l-3. The relative magnitudes of the results have no empirical significance but do illustrate the direction of trade for each endowment scenario. The reader may find the numbers useful for checking equations (6)-(16). Although the results here (Tables 1-3) are qualitatively identical, the interpretations of the initial autarky and the dynamics of trade are different. Thus, when the country with a smaller endowment of resources has a relative abundance of the input in which waste disposal is intensive, its relative cost advantage in waste disposal PD/Pv reflects both its comparative advantage and the fact that, having less goods to consume, its marginal rate of substitution of goods for stored toxic waste is relatively low. More wastes are therefore stored, rather than disposed of by the increasing-cost disposal industry. (This is the case depicted in Table 1.)

When neither country has a comparative advantage in waste disposal, the country with a smaller endowment of resources consumes less and therefore has a smaller marginal rate of substitution of goods for stored toxic wastes. Accordingly, it stores more untreated wastes, and its disposal industry operates at a relatively low cost. It is the disparity of this lower disposal cost relative to that of the country with more resources that makes trade mutually advantageous despite the absence of technological comparative advantage. (This is the case shown in Table 2.)


The much larger quantities of exports, y r and w T, in Table 1 vs Table 2 suggest that comparative advantage has a larger effect on trade than does the disparity in resource endowments.

When the country with more resources also has the comparative advantage in waste disposal, it is nevertheless possible that the other country will specialize in waste disposal. This occurs if that other country's endowments are sufficiently small. In that special case, which is simulated in Table 3, the effect of depressed consumption on the marginal rate of substitution in the poorly endowed country results in such a large stock of stored, untreated waste, that the low operating scale of its disposal industry reduces relative disposal costs below that of the country with the comparative advantage in waste disposal.

When disparities in resource endowments cause a country with smaller resources to specialize in waste disposal, this is explained by the lower marginal rate of substitution of goods for stored toxic waste in that country, which results in an initially low Pigouvian tax on such waste. This causes a relatively large stock of toxic waste to be stored, so that the disposal industry operates at a relatively small scale and low operating cost. Consequently, the country with smaller resources specializes in waste disposal, even though it lacks the technological comparative advantage. This is a formal interpretation of Summers' [29] claim that disparities in resource endowments make for mutual gains in the exporting and importing of toxic wastes.

An interesting result of our work here is that the conventional assumption of homothetic preferences is not required (as it is in the case of two desirable goods [18, p. !14]) to ensure a unique Heckscher-Ohlin-Samuelson solution. It follows from the strong assumptions of the numerical model that the ratio of wastes stored is inversely proportional to the quantities of the good consumed,

w m y s - - . ( 1 7 )

W s y m

This formalizes Summers' [29] argument that countries consuming less goods should store more of the world's wastes. They are better off doing so, that is, better off under free trade than autarky. This strong result holds when markets are perfectly competitive and each country taxes stored wastes at a rate equal to what its citizens are willing to accept for their exposure to the risks. As in the case of autarky, each country must redistribute the Pigouvian tax revenue among its own citizens. International equity requires, at least in the country importing waste, that each citizen receive a lump sum payment from its government equal to what it requires, ex ante , as compensation for its exposure to the marginal unit of stored toxic waste.t There is suffi- cient Pigouvian tax revenue in each country to compensate its own citizen at that e.v an te rate. Because marginal disutility generally increases with the volume of waste stored, the total compensation would exceed the total value of the risk [9].

It is assumed above, as in Ref.[15], that the expected disutility equals actual disutility. However, it may be the case, as in Ref.[16], that some individuals will suffer more ex p o s t than they had expected e x ante . The Pigouvian tax revenue is likely to be insufficient to cover e x p o s t

damages [16, p.7, 30], and this may justify Browning's view that citizens in other countries should not be asked to bear the burden of waste they did not create [19]. However, the view expressed here, that compensation should be for e x an te expected damage, is supported by ample empirical observation [13] of how people actually do evaluate the risks they undertake or avoid.

C O N C L U D I N G REMARKS

Most countries of the industrial world are now on record for supporting the formal ban on hazardous waste exports to developing countries that was ratified at the 1989 Basel Convention

t i t is assumed that compensation payments do not induce households to perversely increare their exposure [1, 4, pp.28 39]. In a more general model, the Pigouvian tax revenue could be used to provide public goods that make potential victims better off. Citizens of both countries might also be better off if Pigouvian taxes replace existing, distortionary taxes [2].

194 Robert E. Kohn

[20]. If the Cl in ton adminis t ra t ion succeeds, the U.S., too, will condi t ional ly support this ban. In February 1994, President Cl in ton sent a proposal to Congress that would ban all exports of hazardous waste, except to Canada and Mexico and to countries that have env i ronmenta l protection laws equivalent to, or stricter, than our own. The present paper argues that it may be efficient for impor t ing countries to have larger ratios of stored to treated wastes, but that they, like the export ing countries, should have an equivalent Pigouvian policy. Provided that the risks of exposure are unders tood by the recipients of the waste, that the mone ta ry value of these risks are translated into Pigouvian taxes on stored wastes, and that the tax revenue is used to fully compensate households for the expected risk being imposed upon them, the free trade of toxic waste is advantageous because everyone shares in the gains.l"

The model is not without its l imitations. Al though the disposal funct ion (2) has the s tandard Heckscher -Ohl in -Samue l son format, it is overly simple. It would be more realistic if, like Harford ' s framework [11], it included the volume of waste throughout , as an input . It is also unrealistic to assume that toxic wastes degrade at the end of each product ion period. This may apply to many kinds of household waste, but is clearly not the case for dioxins, metal-bear ing solvent wastes, radioactive material, etc. Nevertheless, this should not detract from the general conclusion that in ternat ional trade in toxic waste is efficient if individual countries properly tax

all untreated wastes, short-lived and long-lived, stored in their jurisdictions. Pearce [23], Oates [22], and many other envi ronmenta l economists strongly advocate an inter-

na t ional structure of Pigouvian taxes to reduce the flow of pol lutants that threaten the global envi ronment . A politically t roublesome problem with that solution, when pol lut ion flows are global, is that the taxes may have to be supplemented by a flow of compensat ing payments from rich industrialized countries to poor, developing countries [10,15,17]. In the case of toxic waste shipments, however, as long as the damages are confined to the count ry in which the wastes are stored, the complicat ing need for in terna t ional transfer payments is absent. Therefore, the part icular problem to which Summers [29] has called a t tent ion should, in theory, be one of the easier global envi ronmenta l conflicts to resolve.

Acknowledgements--Two anonymous referees have had enormous influence on this paper. One of them made me aware that the economic case for exporting toxic waste can be presented with a model in which the importing country has no comparative advantage in waste disposal but is simply poorer. In all of my previous work, I have assumed that the twin criteria of efficiency and equity are satisfied by policies that have the potential, via lump sum transfers, of making everyone in the economy better off. But the heartfelt antipathy of the other referee toward the exporting of toxic waste made me realize that, in this case, implementation should be contingent upon actual transfer payments within the importing country such that everyone in that country is willing to accept the foreign waste. ! am grateful to these referees and to Barnett Parker, Editor-in-Chief, for encouraging me to be responsive to different, even hostile points of view and for his willingness to publish what may still be a controversial paper.

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Expor t i ng toxic waste 195

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exporting toxic waste

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