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Footloose and Pollution-Free

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  • Josh Ederington
  • Arik Levinson
  • Jenny Minier

Abstract

In numerous studies, economists have found little empirical evidence that environmental regulations affect trade flows. In this paper, we propose and test several common explanations for why the effect of environmental regulations on trade may be difficult to detect. We demonstrate that while most trade occurs among industrialized economies, environmental regulations have stronger effects on trade between industrialized and developing economies. We find that for most industries, pollution abatement costs are a small component of total costs, and are unrelated to trade flows. In addition, we show that those industries with the largest pollution abatement costs also happen to be the least geographically mobile, or footloose.' After accounting for these distinctions, we measure a significant effect of pollution abatement costs on imports from developing countries, and in pollution-intensive, footloose industries.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9718.

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Date of creation: May 2003
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Publication status: published as Josh Ederington & Arik Levinson & Jenny Minier, 2005. "Footloose and Pollution-Free," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 92-99, 01.
Handle: RePEc:nbr:nberwo:9718

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  1. Mody, Ashoka & Roy, Subhendu & Wheeler, David & Dasgupta, Susmita, 1995. "Environmental regulation and development : a cross-country empirical analysis," Policy Research Working Paper Series 1448, The World Bank.
  2. Martin D. D. Evans & Richard K. Lyons, 2000. "Are Different-Currency Assets Imperfect Substitutes?," Working Papers gueconwpa~00-00-05, Georgetown University, Department of Economics.
  3. Adam B. Jaffe et al., 1995. "Environmental Regulation and the Competitiveness of U.S. Manufacturing: What Does the Evidence Tell Us?," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 132-163, March.
  4. 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.
  5. Eliste, Paavo & Fredriksson, Per G., 2002. "Environmental Regulations, Transfers, and Trade: Theory and Evidence," Journal of Environmental Economics and Management, Elsevier, vol. 43(2), pages 234-250, March.
  6. Ellison, G. & Glaeser, E.L., 1994. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," Working papers 94-27, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Copeland, Brian R & Taylor, M Scott, 1994. "North-South Trade and the Environment," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 755-87, August.
  8. McGuire, Martin C., 1982. "Regulation, factor rewards, and international trade," Journal of Public Economics, Elsevier, vol. 17(3), pages 335-354, April.
  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.
  10. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers 0205, National Bureau of Economic Research, Inc.
  11. Siebert, Horst, 1977. "Environmental Quality and the Gains from Trade," Kyklos, Wiley Blackwell, vol. 30(4), pages 657-73.
  12. Robert C. Feenstra, 1996. "U.S. Imports, 1972-1994: Data and Concordances," NBER Working Papers 5515, National Bureau of Economic Research, Inc.
  13. Arik Levinson and M. Scott Taylor, 2004. "Unmasking the Pollution Haven Hypothesis," Working Papers gueconwpa~04-04-04, Georgetown University, Department of Economics.
  14. 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).
  15. Wolfgang Keller & Arik Levinson, 2000. "Environmental Regulations and FDI Inflows to U.S. States," Working Papers gueconwpa~00-00-06, Georgetown University, Department of Economics.
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