Abstract
We empirically investigate the responsiveness of international trade to the stringency of environmental regulation. Stringent environmental regulation may impair the export competitiveness of 'dirty' domestic industries, and as a result, 'pollution havens' emerge in countries where environmental regulation is relatively less stringent. We examine the impact of pollution abatement and control costs on net exports in order to grasp this phenomenon. Theoretically, our analysis is related to a general equilibrium model of trade and pollution nesting the pollution haven motive for trade with the factor endowment motive. We analyze data on two-digit ISIC manufacturing industries during the period 1977-1992 in Germany, the Netherlands and the US, and show that trade patterns in 'dirty' commodities are jointly determined by relative factor endowments and environmental stringency differentials.
| Original language | English |
|---|---|
| Article number | 5 |
| Pages (from-to) | 1-33 |
| Number of pages | 34 |
| Journal | Contributions to Economic Analysis and Policy |
| Volume | 3 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - 1 Dec 2004 |
| Externally published | Yes |
Funding
∗This research is partly funded by the Netherlands Organisation for Scientific Research (NWO) in the Environment and Economy Program. We would like to thank Don Fullerton and two anonymous reviewers for very insightful and helpful comments. Jeroen van den Bergh, Hendrik Folmer, Shelby Gerking, Michael Rauscher, and Aart de Zeeuw provided useful comments and suggestions on earlier versions of this article. The usual disclaimer applies. Abay Mulatu is at the Department of Economic History, London School of Economics, London, UK. Raymond J.G.M. Florax is at the Department of Spatial Economics, Free University, Amsterdam, The Netherlands, and the Department of Agricultural Economics, Purdue University, West Lafayette, USA. Cees A. Withagen is at the Department of Spatial Economics, Free University, Amsterdam, and the Department of Economics, Tilburg University, Tilburg, The Netherlands. He is corresponding author: Department of Spatial Economics, Faculty of Economics, Free University Amsterdam, De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands.
Keywords
- Competitiveness
- Pollution Haven
- Trade
ASJC Scopus subject areas
- Economics and Econometrics
- Economics, Econometrics and Finance (miscellaneous)