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Sources of Comparative Advantage in Polluting Industries

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  • Fernando Broner
  • Paula Bustos
  • Vasco M. Carvalho

Abstract

We study the determinants of comparative advantage in polluting industries. We combine data on environmental policy at the country level with data on pollution intensity at the industry level to show that countries with laxer environmental regulation have a comparative advantage in polluting industries. Further, we address the potential problem of reverse causality. We propose an instrument for environmental regulation based on meteorological determinants of pollution dispersion identi ed by the atmospheric pollution literature. We find that the effect of environmental regulation on the pattern of trade is causal and comparable in magnitude to the effect of physical and human capital.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18337.

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Date of creation: Aug 2012
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Handle: RePEc:nbr:nberwo:18337

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References

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  1. List, John & Sturm, Daniel M, 2004. "How Elections Matter: Theory and Evidence from Environmental Policy," CEPR Discussion Papers 4489, C.E.P.R. Discussion Papers.
  2. 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.
  3. Rema Hanna & Paulina Oliva, 2011. "The Effect of Pollution on Labor Supply: Evidence from a Natural Experiment in Mexico City," NBER Working Papers 17302, National Bureau of Economic Research, Inc.
  4. Michael Greenstone & Rema Hanna, 2011. "Environmental Regulations, Air and Water Pollution, and Infant Mortality in India," NBER Working Papers 17210, National Bureau of Economic Research, Inc.
  5. Judith M. Dean & Mary E. Lovely, 2010. "Trade Growth, Production Fragmentation, and China's Environment," NBER Chapters, in: China's Growing Role in World Trade, pages 429-469 National Bureau of Economic Research, Inc.
  6. Arik Levinson, 2007. "Technology, International Trade, and Pollution from U.S. Manufacturing," NBER Working Papers 13616, National Bureau of Economic Research, Inc.
  7. Cole, Matthew A. & Elliott, Robert J.R. & Shimamoto, Kenichi, 2005. "Industrial characteristics, environmental regulations and air pollution: an analysis of the UK manufacturing sector," Journal of Environmental Economics and Management, Elsevier, vol. 50(1), pages 121-143, July.
  8. Matilde Bombardini & Giovanni Gallipoli & Germán Pupato, 2009. "Skill Dispersion and Trade Flows," Working Paper Series 20_09, The Rimini Centre for Economic Analysis, revised Jan 2009.
  9. Josh Ederington & Jenny Minier, 2000. "Is Environmental Policy a Secondary Trade Barrier? An Empirical Analysis," Econometric Society World Congress 2000 Contributed Papers 1507, Econometric Society.
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  14. Pethig, Rudiger, 1976. "Pollution, welfare, and environmental policy in the theory of Comparative Advantage," Journal of Environmental Economics and Management, Elsevier, vol. 2(3), pages 160-169, February.
  15. Matthew A. Cole & Robert J. R. Elliott & Per G. Fredriksson, 2006. "Endogenous Pollution Havens: Does FDI Influence Environmental Regulations?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(1), pages 157-178, 03.
  16. Andrei A. Levchenko, 2007. "Institutional Quality and International Trade," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 791-819.
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  20. Kellenberg, Derek K., 2009. "An empirical investigation of the pollution haven effect with strategic environment and trade policy," Journal of International Economics, Elsevier, vol. 78(2), pages 242-255, July.
  21. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
  22. Randy A. Becker & J. Vernon Henderson, 2001. "Costs of Air Quality Regulation," NBER Chapters, in: Behavioral and Distributional Effects of Environmental Policy, pages 159-186 National Bureau of Economic Research, Inc.
  23. Barro, Robert J. & Lee, Jong Wha, 2013. "A new data set of educational attainment in the world, 1950–2010," Journal of Development Economics, Elsevier, vol. 104(C), pages 184-198.
  24. Kudamatsu, Masayuki & Persson, Torsten & Strömberg, David, 2012. "Weather and Infant Mortality in Africa," CEPR Discussion Papers 9222, C.E.P.R. Discussion Papers.
  25. Michael Greenstone & John A. List & Chad Syverson, 2011. "The Effects of Environmental Regulation on the Competiveness of U.S. Manufacturing," Working Papers 11-03, Center for Economic Studies, U.S. Census Bureau.
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Citations

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Cited by:
  1. Markusen, James R., 2012. "Per-Capita Income as a Determinant of International Trade and Environmental Policies," Discussion Papers 2013-06, Graduate School of Economics, Hitotsubashi University.
  2. Svetlana Batrakova, 2012. "Does industry concentration matter for pollution haven effects?," Grantham Research Institute on Climate Change and the Environment Working Papers 90, Grantham Research Institute on Climate Change and the Environment.
  3. James R. Markusen, 2014. "Per-Capital Income as a Determinant of International Trade and Environment Policies," CESifo Working Paper Series 4618, CESifo Group Munich.
  4. Claire Brunel & Arik Levinson, 2013. "Measuring Environmental Regulatory Stringency," OECD Trade and Environment Working Papers 2013/5, OECD Publishing.
  5. Chung, Sunghoon, 2014. "Environmental regulation and foreign direct investment: Evidence from South Korea," Journal of Development Economics, Elsevier, vol. 108(C), pages 222-236.
  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.

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