Environmental Regulation and International Trade
AbstractWe 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 ‘over-lax.’ 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 InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 04-020/3.
Date of creation: 17 Feb 2004
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Trade; competitiveness; environmental policy; pollution abatement; pollution haven;
Find related papers by JEL classification:
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
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