labor (which increases the returns to cheating as the probability of being caught falls).If natural resources were not geographically concentrated, then an opening to trade could lead to an all-around increase in welfare as comparative advantage would then lie in the North (i.e. the country with a better property rights regime) and the fall in the resource price in the South would lead to an improvement in the property rights regime in the South as the returns to cheating would fall (Copeland and Taylor (2009)).

This welfare-increasing outcome from opening to trade or from trade liberalization is unlikely because of the great geographical concentration of natural resources in lowincome countries reflecting the pattern that high-income countries are overwhelmingly net importers of natural resources(WTO (2o10, p.49). In addition, the ability to enforce property rights is likely to be weakened by the lobbying and corruption made possible by the rents in the low-incomes countries. In sum, it is difficult to dispel the possibility that trade in natural resources exported by poor countries, --especially for resources with low replenishment rates--will do more harm than good. Trade could then lead to a loss of natural capital and to negative ‘genuine savings’, possibly resulting in an unsustainable development path. In this case, cooperation from importing countries (presumably with better institutions) would help alleviate the resource curse problem.

A large (and still-growing) empirical literature tries to identify the presence of a robust ‘natural resource curse’. This, however, need not be the case (see the summaries in Lederman and Maloney (2007) and Van der Ploeg (2011)). When explored comprehensively across channels and across countries, the findings are varied, with the outcome dependent on the institutional set-up and other determinants unrelated to trade (e.g. geography or fractionalization of the population).<sup>8</sup> Perhaps less emphasized is the finding that natural riches engender institutional weaknesses as groups attempt to capture rents (Mehlum, H., K. Moene and R. Torvik (2006)). This curse-via-politics is largely endogenous to the political environment and not subject to improvements by governments in power who have a vested interest in blocking institutional change. Resource riches can also block the trade reforms that would reduce distortions and improve the management of natural resources. For example, drawing on the Doing Business data, in a large sample of 133 countries, Amin and Djankov (2008) find that the proclivity to undertake micro-reforms that reduce regulation is much less in countries whose exports are concentrated in abundant natural resources.<sup>9</sup>

# **3.2 Transport-Related Emissions**

The elasticity of trade to world income has grown from around 2.0 in the 1960s to 3.7 in the 2000s (Freund (2009)). For environmentalists, this is evidence that international trade is a direct contributor to deterioration of the environment.

> 8The early literature mistakenly used resource dependence as a measure of resource abundance. When this distinction is made the ‘resource curse’ effects found in the early literature are dampened (Brunnschweiler and Bulte (2008)).  Evidence shows that resource dependence and institutional quality are negatively correlated (Isham et al.). The outcome of natural resource abundance and performance also depends on the institutional setting (Bhattacharya and Hodler (2008)).

> 9 Collier and Hoeffler (2004) were the first to give evidence that conflicts were more likely to be driven by greed to get hold of the rents than by grievances due to ethnic or religious conflicts. Bulte and Brunschweiler (2009) contest this result suggesting that conflict increases dependence on resource extraction (captured by the share of primary exports) while resource abundance (measured by resource stocks) is associated with a reduced probability of civil war.

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