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Environmental Policy and Industrial Competitiveness: The Pollution-Haven Hypothesis Reconsidered

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  • Bommer, Rolf

Abstract

The pollution-haven hypothesis suggests that strict environmental standards reduce domestic producers' competitiveness and result in relocation to countries with more lenient standards. This paper examines the question of whether relocation is always caused by reduced competitiveness at home. By using a signaling approach, it is shown that relocation can be undertaken for purely strategic reasons. Relocation is the producer's tool of indirect rent-seeking to convince the policymaker to refrain from a further tightening of environmental control. It is also shown that trade liberalization increases the probability of strategic relocation. Copyright 1999 by Blackwell Publishing Ltd.

Suggested Citation

  • Bommer, Rolf, 1999. "Environmental Policy and Industrial Competitiveness: The Pollution-Haven Hypothesis Reconsidered," Review of International Economics, Wiley Blackwell, vol. 7(2), pages 342-355, May.
  • Handle: RePEc:bla:reviec:v:7:y:1999:i:2:p:342-55
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    Cited by:

    1. José-Antonio Monteiro & Madina Kukenova, 2008. "Does Lax Environmental Regulation Attract FDI When Accounting For "Third-Country" Effects?," IRENE Working Papers 08-01, IRENE Institute of Economic Research.
    2. Dinda, Soumyananda, 2006. "Globalization and Environment: Can Pollution Haven Hypothesis alone explain the impact of Globalization on Environment?," MPRA Paper 50590, University Library of Munich, Germany, revised 15 Oct 2006.
    3. Mohamed Abdouli & Sami Hammami, 2017. "Economic growth, FDI inflows and their impact on the environment: an empirical study for the MENA countries," Quality & Quantity: International Journal of Methodology, Springer, vol. 51(1), pages 121-146, January.
    4. Jing Lan & Makoto Kakinaka & Xianguo Huang, 2012. "Foreign Direct Investment, Human Capital and Environmental Pollution in China," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 51(2), pages 255-275, February.
    5. Isik, Murat, 2003. "Environmental Regulation And The Optimal Location Of The Firm Under Uncertainty," 2003 Annual meeting, July 27-30, Montreal, Canada 22066, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Jiang, Yi & Lin, Tun & Zhuang, Juzhong, 2008. "Environmental Kuznets Curves in the People’s Republic of China: Turning Points and Regional Differences," ADB Economics Working Paper Series 141, Asian Development Bank.
    7. Valeria Costantini & Francesco Crespi, 2013. "Public policies for a sustainable energy sector: regulation, diversity and fostering of innovation," Journal of Evolutionary Economics, Springer, vol. 23(2), pages 401-429, April.
    8. Costantini, Valeria & Crespi, Francesco, 2008. "Environmental regulation and the export dynamics of energy technologies," Ecological Economics, Elsevier, vol. 66(2-3), pages 447-460, June.
    9. Dinda, Soumyananda, 2004. "Environmental Kuznets Curve Hypothesis: A Survey," Ecological Economics, Elsevier, vol. 49(4), pages 431-455, August.

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