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Trade Pessimists vs Technology Optimists: Induced Technical Change and Pollution Havens

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  • Di Maria Corrado

    ()
    (Tilburg University)

  • Smulders Sjak A.

    ()
    (Tilburg University)

Abstract

Our paper focuses on the role of endogenous technology and technology spillovers in explaining cross country differences in pollution and the pollution haven effect of international trade. In our North-South trade model, technology is endogenously developed by the North and imitated by the South. Environmental regulators choose national environmental policies by trading off the income gains and the disutility from a rise in pollution. Differences in environmental stringency are entirely driven by differences in investment opportunities and distortions that follow from the difference in intellectual property rights protection. We show that without goods trade and in the absence of technology subsidies, the North imposes more stringent environmental regulation than the South. When opening up to trade, the South experiences a rise in prices for pollution-intensive goods and tends to raise pollution as in a standard trade model. Induced technical change, however, may reverse this pollution haven effect.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 3 (2005)
Issue (Month): 2 (January)
Pages: 1-27

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Handle: RePEc:bpj:bejeap:v:advances.4:y:2005:i:2:n:7

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Cited by:
  1. Don Fullerton & Daniel Karney & Kathy Baylis, 2011. "Negative Leakage," NBER Working Papers 17001, National Bureau of Economic Research, Inc.
  2. Di Maria, C. & Werf, E.H. van der, 2005. "Carbon Leakage Revisited: Unilateral Climate Policy with Directed Technical Change," Discussion Paper 2005-68, Tilburg University, Center for Economic Research.
  3. Elliott, Joshua & Fullerton, Don, 2014. "Can a unilateral carbon tax reduce emissions elsewhere?," Resource and Energy Economics, Elsevier, vol. 36(1), pages 6-21.
  4. Yoram Bauman & Myunghun Lee & Karl Seeley, 2008. "Does Technological Innovation Really Reduce Marginal Abatement Costs? Some Theory, Algebraic Evidence, and Policy Implications," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 40(4), pages 507-527, August.
  5. Ignazio Musu, 2010. "Green Economy: great expectation or big illusion?," Working Papers 2010_01, Department of Economics, University of Venice "Ca' Foscari".
  6. Sunghoon Chung, 2012. "Environmental Regulation and the Pattern of Outward FDI: An Empirical Assessment of the Pollution Haven Hypothesis," Departmental Working Papers 1203, Southern Methodist University, Department of Economics.
  7. Di Maria, Corrado & Valente, Simone, 2006. "The Direction of Technical Change in Capital-Resource Economies," MPRA Paper 1040, University Library of Munich, Germany.
  8. Smulders, Sjak & Withagen, Cees, 2012. "Green growth -- lessons from growth theory," Policy Research Working Paper Series 6230, The World Bank.
  9. Reyer Gerlagh & Onno Kuik, 2007. "Carbon Leakage with International Technology Spillovers," Working Papers 2007.33, Fondazione Eni Enrico Mattei.
  10. Cunha-e-Sa, Maria Antonieta & Leitao, Alexandra & Reis, Ana Balcao, 2010. "Innovation and Environmental Policy: Clean vs. Dirty Technical Change," FEUNL Working Paper Series wp548, Universidade Nova de Lisboa, Faculdade de Economia.
  11. Enrica De Cian, 2006. "International Technology Spillovers in Climate-Economy Models: Two Possible Approaches," Working Papers 2006.141, Fondazione Eni Enrico Mattei.
  12. Satoshi Honma & Yushi Yoshida, 2012. "An Empirical Investigation of the Balance of Embodied Emission in Trade:Industry Structure and Emission Abatement," Discussion Papers 57, Kyushu Sangyo University, Faculty of Economics.
  13. Umed Temurshoev, 2006. "Pollution Haven Hypothesis or Factor Endowment Hypothesis: Theory and Empirical Examination for the US and China," CERGE-EI Working Papers wp292, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  14. Mona Haddad & Ben Shepherd, 2011. "Managing Openness : Trade and Outward-oriented Growth After the Crisis," World Bank Publications, The World Bank, number 2283, October.

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