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Pollution Haven Effect with Heterogeneous Firms

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  • Zhang, Hongliang
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    Abstract

    I developed a heterogeneous firm model to examine pollution haven effect within the industry. Environmental regulation reduces the number of domestic firms in the industry by forcing the least productive firms out, and shifts the domestic firms into the foreign country. Although there are resource allocations between firms, total welfare is decreasing due to the stringency of regulation. The impact of environmental regulation on the competitiveness is dependent on the relative size of abatement cost to marginal production cost and regulation regimes.

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    File URL: http://purl.umn.edu/150781
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    Bibliographic Info

    Paper provided by Agricultural and Applied Economics Association in its series 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. with number 150781.

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    Date of creation: 2013
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    Handle: RePEc:ags:aaea13:150781

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    Keywords: Heterogeneous firms; Pollution Haven Effect; Environmental regulation; Environmental Economics and Policy; Research and Development/Tech Change/Emerging Technologies;

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    1. Vernon Henderson, 1995. "Effects of Air Quality Regulation," NBER Working Papers 5118, National Bureau of Economic Research, Inc.
    2. van Beers, Cees & van den Bergh, Jeroen C J M, 1997. "An Empirical Multi-country Analysis of the Impact of Environmental Regulations on Foreign Trade Flows," Kyklos, Wiley Blackwell, vol. 50(1), pages 29-46.
    3. Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004. "Export versus FDI with Heterogeneous Firms," Scholarly Articles 3229098, Harvard University Department of Economics.
    4. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
    5. Siebert, Horst, 1977. "Environmental quality and the gains from trade," Open Access Publications from Kiel Institute for the World Economy 3530, Kiel Institute for the World Economy (IfW).
    6. Ravi Ratnayake, 1998. "Do Stringent Environmental Regulations Reduce International Competitiveness? Evidence from an Inter-industry A nalysis," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 5(1), pages 77-96.
    7. Randy Becker & Vernon Henderson, 2000. "Effects of Air Quality Regulations on Polluting Industries," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 379-421, April.
    8. Wolfgang Keller & Arik Levinson, 2002. "Pollution Abatement Costs and Foreign Direct Investment Inflows to U.S. States," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 691-703, November.
    9. Siebert, Horst, 1977. "Environmental Quality and the Gains from Trade," Kyklos, Wiley Blackwell, vol. 30(4), pages 657-73.
    10. Tobey, James A, 1990. "The Effects of Domestic Environmental Policies on Patterns of World Trade: An Empirical Test," Kyklos, Wiley Blackwell, vol. 43(2), pages 191-209.
    11. Xu, Xinpeng, 1999. "Do Stringent Environmental Regulations Reduce the International Competitiveness of Environmentally Sensitive Goods? A Global Perspective," World Development, Elsevier, vol. 27(7), pages 1215-1226, July.
    12. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September.
    13. John A. List & Daniel L. Millimet & Per G. Fredriksson & W. Warren McHone, 2003. "Effects of Environmental Regulations on Manufacturing Plant Births: Evidence from a Propensity Score Matching Estimator," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 944-952, November.
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