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Have Countries with Lax Environmental Regulations a Comparative Advantage in Polluting Industries?

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  • Quiroga, Miguel
  • Sterner, Thomas
  • Persson, Martin

Abstract

We aim to study whether lax environmental regulations induce comparative advantages, causing the least-regulated countries to specialize in polluting industries. The study is based on Trefler and Zhu’s (2005) definition of the factor content of trade. For the econometrical analysis, we use a cross-section of 71 countries in 2000 to examine the net exports in the most polluting industries. We try to overcome three weaknesses in the empirical literature: the measurement of environmental endowments or environmental stringency, the possible endogeneity of the explanatory variables, and the influence of the industrial level of aggregation. As a result, we do find some evidence in favor of the pollution-haven effect. The exogeneity of the environmental endowments was rejected in several industries, and we also find that industrial aggregation matters.

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Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-07-08.

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Date of creation: 24 Apr 2007
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Handle: RePEc:rff:dpaper:dp-07-08

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Keywords: comparative advantage; environmental regulation; trade; pollution haven; Porter hypothesis;

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Cited by:
  1. Schoenherr, Tobias, 2012. "The role of environmental management in sustainable business development: A multi-country investigation," International Journal of Production Economics, Elsevier, vol. 140(1), pages 116-128.

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