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

Author

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  • 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.

Suggested Citation

  • Frank Ackerman & Kevin Gallagher, 2001. "Trade Liberalization and Pollution Intensive Industries in Developing Countries: A Partial Equilibrium Approach," International Trade 0106004, University Library of Munich, Germany.
    • 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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    References listed on IDEAS

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    2. 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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    5. 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.
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    Cited by:

    1. Indriya, Soca & Widodo, Tri, 2011. "Do Pollution Havens Exist? Evidence from East Asia," MPRA Paper 79924, University Library of Munich, Germany.
    2. Kakali Mukhopadhyay & Debesh Chakraborty, 2005. "Is liberalization of trade good for the environment? Evidence from India," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 12(1), pages 109-136, June.
    3. Paul Lanoie & Jérémy Laurent‐Lucchetti & Nick Johnstone & Stefan Ambec, 2011. "Environmental Policy, Innovation and Performance: New Insights on the Porter Hypothesis," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(3), pages 803-842, September.
    4. Kevin P. Gallagher & Frank Ackerman & Luke Ney, "undated". "Economic Analysis in Environmental Reviews of Trade Agreements: Assessing the North American Experience," GDAE Working Papers 02-01, GDAE, Tufts University.
    5. Dellachiesa, Alejandro E. & Myint, Aung P., 2016. "Trade openness and the changing water polluting intensity patterns of ‘dirty’ and ‘clean’ industrial sectors," Ecological Economics, Elsevier, vol. 129(C), pages 143-151.
    6. Kevin Gallagher, 2001. "Trade Liberalization and Industrial Pollution in Mexico: Lessons for the FTAA"," International Trade 0106003, University Library of Munich, Germany.
    7. 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.

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    More about this item

    Keywords

    trade liberalization; partial equilibrium; pollution haven; trade; environmental policy; NAFTA;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • O0 - Economic Development, Innovation, Technological Change, and Growth - - General
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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