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Does the ‘California effect’ operate across borders? trading- and investing-up in automobile emission standards

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  • Perkins, Richard
  • Neumayer, Eric

Abstract

The 'California effect' hypothesis posits that economic integration may lead to the ratcheting upwards of regulatory standards towards levels found in higher-regulating jurisdictions. Although a number of previous large sample quantitative studies have investigated such convergence dynamics for public environmental policies, their results have been based exclusively on geographically and sectorally aggregated data. Our contribution advances on these studies. We provide the first large-N, geographically disaggregated evidence consistent with a trading-up effect: exports of automobiles and related components from developing countries to countries with more stringent automobile emission standards are found to be associated with more stringent domestic emission standards. Investing-up dynamics are also apparent, with aggregate inward foreign direct investment into host developing economies' automotive sector increasing the likelihood of more stringent emission standards domestically.

Suggested Citation

  • Perkins, Richard & Neumayer, Eric, 2012. "Does the ‘California effect’ operate across borders? trading- and investing-up in automobile emission standards," LSE Research Online Documents on Economics 42097, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:42097
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    Cited by:

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    2. Chakraborty, Pavel & Chatterjee, Chirantan, 2017. "Does environmental regulation indirectly induce upstream innovation? New evidence from India," Research Policy, Elsevier, vol. 46(5), pages 939-955.
    3. Patrick Wagner & Damian Raess, 2023. "South to north investment linkages and decent work in Brazil," LABOUR, CEIS, vol. 37(1), pages 122-159, March.
    4. Dechezlepretre, Antoine & Perkins, Richard & Neumayer, Eric, 2012. "Regulatory Distance and the Transfer of New Environmentally Sound Technologies: Evidence from the Automobile Sector," Climate Change and Sustainable Development 128199, Fondazione Eni Enrico Mattei (FEEM).
    5. Franckx, Laurent, 2014. "Regulatory emission limits for mobile sources and the Porter hypothesis: a survey of the literature," MPRA Paper 56448, University Library of Munich, Germany.
    6. Peter Egger & Doina Radulescu & Nora Strecker, 2017. "On the spread of social protection systems," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(4), pages 550-574, August.
    7. Caroline Freund & Sarah Oliver, 2015. "Gains from Harmonizing US and EU Auto Regulations under the Transatlantic Trade and Investment Partnership," Policy Briefs PB15-10, Peterson Institute for International Economics.
    8. Mohamed Boly, 2018. "CO 2 mitigation in developing countries: the role of foreign aid," Working Papers halshs-01740881, HAL.
    9. Dechezleprêtre, Antoine & Neumayer, Eric & Perkins, Richard, 2015. "Environmental regulation and the cross-border diffusion of new technology: Evidence from automobile patents," Research Policy, Elsevier, vol. 44(1), pages 244-257.
    10. Suchita Srinivasan, 2017. "Driven up the wall? Role of environmental regulation in innovation along the automotive global value chain," CIES Research Paper series 52-2017, Centre for International Environmental Studies, The Graduate Institute.
    11. Costantini, Valeria & Crespi, Francesco & Paglialunga, Elena & Sforna, Giorgia, 2020. "System transition and structural change processes in the energy efficiency of residential sector: Evidence from EU countries," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 309-329.
    12. Dolphin, G. & Pollitt, M., 2018. "International Spillovers and Carbon Pricing Policies," Cambridge Working Papers in Economics 1803, Faculty of Economics, University of Cambridge.
    13. Chakraborty, Pavel & Chakrabarti, Anindya S. & Chatterjee, Chirantan, 2023. "Cross-border environmental regulation and firm labor demand," Journal of Environmental Economics and Management, Elsevier, vol. 117(C).
    14. Dolphin, Geoffroy & Pollitt, Michael G., 2021. "The International Diffusion of Climate Policy: Theory and Evidence," RFF Working Paper Series 21-23, Resources for the Future.
    15. Kolcava, Dennis & Nguyen, Quynh & Bernauer, Thomas, 2019. "Does trade liberalization lead to environmental burden shifting in the global economy?," Ecological Economics, Elsevier, vol. 163(C), pages 98-112.
    16. Flannery, Wesley & O’Hagan, Anne Marie & O’Mahony, Cathal & Ritchie, Heather & Twomey, Sarah, 2015. "Evaluating conditions for transboundary Marine Spatial Planning: Challenges and opportunities on the island of Ireland," Marine Policy, Elsevier, vol. 51(C), pages 86-95.
    17. Federica Genovese & Endre Tvinnereim, 2019. "Who opposes climate regulation? Business preferences for the European emission trading scheme," The Review of International Organizations, Springer, vol. 14(3), pages 511-542, September.
    18. Daniel Witte, 2020. "Business for Climate: A Qualitative Comparative Analysis of Policy Support from Transnational Companies," Global Environmental Politics, MIT Press, vol. 20(4), pages 167-191, Autumn.
    19. David J. Gordon, 2015. "An Uneasy Equilibrium: The Coordination of Climate Governance in Federated Systems," Global Environmental Politics, MIT Press, vol. 15(2), pages 121-141, May.
    20. Peter Egger & Doina Radulescu & Nora Strecker, 2017. "On the spread of social protection systems," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(4), pages 550-574, August.
    21. Miller, Sebastián J. & Vela, Mauricio A., 2013. "Are Environmentally Related Taxes Effective?," IDB Publications (Working Papers) 4685, Inter-American Development Bank.
    22. Caroline Freund & Sarah Oliver, 2015. "Gains from Convergence in US and EU Auto Regulations under the Transatlantic Trade and Investment Partnership," RSCAS Working Papers 2015/59, European University Institute.
    23. Jonas Gamso, 2018. "Trade-based adoption of voluntary environmental programs in the developing world: Racing to the top or stuck in the mud?," Policy Sciences, Springer;Society of Policy Sciences, vol. 51(4), pages 515-543, December.
    24. Consoli, Davide & Costantini, Valeria & Paglialunga, Elena, 2023. "We're in this together: Sustainable energy and economic competitiveness in the EU," Research Policy, Elsevier, vol. 52(1).
    25. Abdoul G. Sam & Danbee Song, 2022. "Corporate environmentalism and international trade: Evidence from industry‐level data," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(5), pages 1440-1455, September.

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    More about this item

    Keywords

    automobiles; California effect; convergence; investing-up; standards; trading-up;
    All these keywords.

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

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