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Trade Liberalization and Pollution Intensive Industries in Developing Countries: A Partial Equilibrium Approach

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Author Info

  • Frank Ackerman

    (The Global Development And Environment Institute at Tufts Universty)

  • Kevin Gallagher

    (The Global Development And Environment Institute at Tufts Universty)

Abstract

Economic theory suggests that liberalization of trade between countries with differing levels of environmental protection could lead pollution- intensive industry to concentrate in the nations where regulations are lax. This effect, often referred to as the “pollution haven” hypothesis, is much discussed in theory, but finds only ambiguous support in empirical research to date. Methodologies used for research on trade and environment differ widely; many are difficult to apply to practical policy questions. We develop a simple, partial equilibrium model explicitly designed to analyze the effects of a change in trade policy. Our model analyzes the relative concentrations of “clean” and “dirty” industries in two nations or regions, before and after the policy change. While lacking the theoretical rigor and mathematical intricacy of other modeling methods, our approach has the advantages of transparency and accessibility to a broad range of analysts and policy makers.

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File URL: http://128.118.178.162/eps/it/papers/0106/0106004.pdf
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Bibliographic Info

Paper provided by EconWPA in its series International Trade with number 0106004.

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Length: 21 pages
Date of creation: 13 Jun 2001
Date of revision:
Handle: RePEc:wpa:wuwpit:0106004

Note: Type of Document - PDF; pages: 21; figures: n/a. This paper was published in Methodologies for Assessing the Environmental Impacts of Trade Liberalization Agreements. Dale Andrews, ed. (Paris: OECD, 2000). It has been reprinted with permission. Other working papers available at www.gdae.org
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Related research

Keywords: trade liberalization; partial equilibrium; pollution haven; trade; environmental policy; NAFTA;

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References

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  1. Eskeland, Gunnar S. & Harrison, Ann E., 1997. "Moving to greener pastures : multinationals and the pollution-haven hypothesis," Policy Research Working Paper Series 1744, The World Bank.
  2. Timothy J. Bartik, 2002. "The Effects of Environmental Regulation on Business Location in the United States," Book chapters authored by Upjohn Institute researchers, in: Wayne B. Gray (ed.), Economic Costs and Consequences of Environmental Regulation, pages 129-151 W.E. Upjohn Institute for Employment Research.
  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. Timothy J. Bartik, 2010. "Small Business Start-Ups in the United States: Estimates of the Effects of Characteristics of States," Book chapters authored by Upjohn Institute researchers, in: Zolton Acs (ed.), Entrepreneurship and regional Development, pages 155-169 W.E. Upjohn Institute for Employment Research.
  5. Frank Ackerman, 2001. "Still dead after all these years: interpreting the failure of general equilibrium theory," Journal of Economic Methodology, Taylor & Francis Journals, vol. 9(2), pages 119-139.
  6. Levinson, Arik, 1996. "Environmental regulations and manufacturers' location choices: Evidence from the Census of Manufactures," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 5-29, October.
  7. Revesz, Richard L. & Stavins, Robert N., 2007. "Environmental Law," Handbook of Law and Economics, Elsevier.
  8. Dean, Judith M., 1992. "Trade and the environment : a survey of the literature," Policy Research Working Paper Series 966, The World Bank.
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Cited by:
  1. Grant Ferrier, 2010. "The evolution of the environmental industry in the post-NAFTA era in Mexico," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 10(2), pages 147-164, June.
  2. Kevin P. Gallagher & Frank Ackerman & Luke Ney, . "02-01 "Economic Analysis in Environmental Reviews of Trade Agreements: Assessing the North American Experience"," GDAE Working Papers 02-01, GDAE, Tufts University.

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