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Can Rich Countries Become Pollution Havens?

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  • Victoria I. Umanskaya
  • Edward B. Barbier

Abstract

This paper bridges the gap between two‐country Ricardian trade models where differences in environmental policies create pollution havens in a poorer region with weaker pollution regulations, and 2 × 2 Heckscher–Ohlin models that predict under certain conditions that pollution havens may occur in a richer region with tighter regulations. By relaxing the Heckscher–Ohlin assumptions of factor price equalization and no specialization, we show how creation of pollution havens in either region is possible, due to the interplay of policy and factor‐endowment motives. We also analyze the conditions for creating pollution havens in the cases of exogenous and endogenous environmental policy.

Suggested Citation

  • Victoria I. Umanskaya & Edward B. Barbier, 2008. "Can Rich Countries Become Pollution Havens?," Review of International Economics, Wiley Blackwell, vol. 16(4), pages 627-640, September.
  • Handle: RePEc:bla:reviec:v:16:y:2008:i:4:p:627-640
    DOI: 10.1111/j.1467-9396.2008.00768.x
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    File URL: https://doi.org/10.1111/j.1467-9396.2008.00768.x
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    References listed on IDEAS

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    1. Javorcik Beata Smarzynska & Wei Shang-Jin, 2003. "Pollution Havens and Foreign Direct Investment: Dirty Secret or Popular Myth?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(2), pages 1-34, December.
    2. Ederington Josh & Levinson Arik & Minier Jenny, 2004. "Trade Liberalization and Pollution Havens," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(2), pages 1-24, November.
    3. Eskeland, Gunnar S. & Harrison, Ann E., 2003. "Moving to greener pastures? Multinationals and the pollution haven hypothesis," Journal of Development Economics, Elsevier, vol. 70(1), pages 1-23, February.
    4. Werner Antweiler & Brian R. Copeland & M. Scott Taylor, 2001. "Is Free Trade Good for the Environment?," American Economic Review, American Economic Association, vol. 91(4), pages 877-908, September.
    5. Markusen James R. & Morey Edward R. & Olewiler Nancy D., 1993. "Environmental Policy when Market Structure and Plant Locations Are Endogenous," Journal of Environmental Economics and Management, Elsevier, vol. 24(1), pages 69-86, January.
    6. Theodore Panayotou, 2000. "Globalization and Environment," CID Working Papers 53, Center for International Development at Harvard University.
    7. Low, P., 1992. "International Trade and the Environment," World Bank - Discussion Papers 159, World Bank.
    8. Markusen, James R. & Morey, Edward R. & Olewiler, Nancy, 1995. "Competition in regional environmental policies when plant locations are endogenous," Journal of Public Economics, Elsevier, vol. 56(1), pages 55-77, January.
    9. Rudiger Dornbusch & Stanley Fischer & Paul A. Samuelson, 1980. "Heckscher-Ohlin Trade Theory with a Continuum of Goods," The Quarterly Journal of Economics, Oxford University Press, vol. 95(2), pages 203-224.
    10. Theodore Panayotou, 2000. "Globalization and Environment," CID Working Papers 53A, Center for International Development at Harvard University.
    11. Brian R. Copeland & M. Scott Taylor, 1994. "North-South Trade and the Environment," The Quarterly Journal of Economics, Oxford University Press, vol. 109(3), pages 755-787.
    12. 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.
    13. Copeland Brian R., 1994. "International Trade and the Environment: Policy Reform in a Polluted Small Open Economy," Journal of Environmental Economics and Management, Elsevier, vol. 26(1), pages 44-65, January.
    14. R. W. Jones, 1956. "Factor Proportions and the Heckscher-Ohlin Theorem," Review of Economic Studies, Oxford University Press, vol. 24(1), pages 1-10.
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    Cited by:

    1. Louis Dupuy & Matthew Agarwala, 2014. "International trade and sustainable development," Chapters, in: Giles Atkinson & Simon Dietz & Eric Neumayer & Matthew Agarwala (ed.), Handbook of Sustainable Development, chapter 25, pages 399-417, Edward Elgar Publishing.
    2. Bogmans, C.W.J., 2011. "Essays on international trade and the environment," Other publications TiSEM b7453a6c-33b3-49a2-b5cc-8, Tilburg University, School of Economics and Management.
    3. Christian Beermann, 2015. "Climate Policy and the Intertemporal Supply of Fossil Resources," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 62.
    4. Bidisha Lahiri, 2015. "Role of labor intensity interaction in the relation between abatement expenditure and production," Economics Bulletin, AccessEcon, vol. 35(1), pages 407-413.
    5. Baomin Dong & Jiong Gong & Xin Zhao, 2012. "FDI and environmental regulation: pollution haven or a race to the top?," Journal of Regulatory Economics, Springer, vol. 41(2), pages 216-237, April.

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