The paper studies the effects of environmental policy on world-wide growth and the global emission level. For this purpose, a macroeconomic North/South-model with two different assumptions on the dislocation of firms from North to South is constructed ("imitation"- and "production shift"-hypothesis). It can be shown that free trade between world regions does not harm the effectiveness of environmental policy of the North. Also, it emerges that the "imitation"-hypothesis predicts a stronger effect on the environment and a weaker impact on growth compared to the "production shift"-hypothesis.
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