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Environmental Regulation and International Trade: Empirical Results for Germany, the Netherlands and the US, 1977-1992

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Author Info

  • Mulatu Abay

    ()
    (London School of Economics and Political Science)

  • Florax Raymond J.G.M.

    ()
    (Free University Amsterdam, and Purdue University, Lafayette, IN)

  • Withagen Cees

    ()
    (Free University Amsterdam/Tilburg University)

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.

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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 (2003)
Issue (Month): 2 (December)
Pages: 1-30

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Handle: RePEc:bpj:bejeap:v:contributions.3:y:2004:i:2:n:5

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Cited by:
  1. Cave, Lisa A. & Blomquist, Glenn C., 2008. "Environmental policy in the European Union: Fostering the development of pollution havens?," Ecological Economics, Elsevier, vol. 65(2), pages 253-261, April.
  2. Frankel, Jeffrey A., 2009. "Environmental Effects of International Trade," Scholarly Articles 4481652, Harvard Kennedy School of Government.
  3. Medalla, Erlinda M. & Lazaro, Dorothea C., 2005. "Does Trade Lead to a Race to the Bottom in Environmental Standards? Another Look at the Issues," Discussion Papers DP 2005-23, Philippine Institute for Development Studies.
  4. Leiter, Andrea M. & Parolini, Arno & Winner, Hannes, 2010. "Environmental Regulation and Investment: Evidence from European Country-Industry Data," Working Papers in Economics and Finance 2010-1, University of Salzburg, revised 13 Jan 2010.
  5. Costantini, Valeria & Crespi, Francesco, 2009. "Public policies for a sustainable energy sector: regulation, diversity and fostering of innovation," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 200915, University of Turin.
  6. Andrea M. Leiter & Arno Parolini & Hannes Winner, 2009. "Environmental Regulation and Investment: Evidence from European Industries," Working Papers 2009-04, Faculty of Economics and Statistics, University of Innsbruck.
  7. Babool, Md. Ashfaqul Islam & Reed, Michael R., 2005. "International Competitiveness and Environmental Regulations," 2005 Annual meeting, July 24-27, Providence, RI 19496, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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