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Environmental Regulation and International Trade: Empirical Results for Germany, the Netherlands and the US, 1977-1992

Author

Listed:
  • Mulatu Abay

    () (London School of Economics and Political Science)

  • Florax Raymond J.G.M.

    () (Free University Amsterdam, and Purdue University, Lafayette, IN)

  • Withagen Cees

    () (Free University Amsterdam/Tilburg University)

Abstract

We empirically investigate the responsiveness of international trade to the stringency of environmental regulation. Stringent environmental regulation may impair the export competitiveness of dirty domestic industries, and as a result, pollution havens emerge in countries where environmental regulation is relatively less stringent. We examine the impact of pollution abatement and control costs on net exports in order to grasp this phenomenon. Theoretically, our analysis is related to a general equilibrium model of trade and pollution nesting the pollution haven motive for trade with the factor endowment motive. We analyze data on two-digit ISIC manufacturing industries during the period 19771992 in Germany, the Netherlands and the US, and show that trade patterns in dirty commodities are jointly determined by relative factor endowments and environmental stringency differentials.

Suggested Citation

  • Mulatu Abay & Florax Raymond J.G.M. & Withagen Cees, 2003. "Environmental Regulation and International Trade: Empirical Results for Germany, the Netherlands and the US, 1977-1992," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(2), pages 1-30, December.
  • Handle: RePEc:bpj:bejeap:v:contributions.3:y:2004:i:2:n:5
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    Citations

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    Cited by:

    1. Cave, Lisa A. & Blomquist, Glenn C., 2008. "Environmental policy in the European Union: Fostering the development of pollution havens?," Ecological Economics, Elsevier, vol. 65(2), pages 253-261, April.
    2. Leiter, Andrea M. & Parolini, Arno & Winner, Hannes, 2010. "Environmental Regulation and Investment: Evidence from European Country-Industry Data," Working Papers in Economics 2010-1, University of Salzburg, revised 13 Jan 2010.
    3. Babool, Md. Ashfaqul Islam & Reed, Michael R., 2005. "International Competitiveness and Environmental Regulations," 2005 Annual meeting, July 24-27, Providence, RI 19496, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Abay Mulatu, 2008. "Weighing the relative importance of environmental regulation for industry location," The School of Economics Discussion Paper Series 0803, Economics, The University of Manchester.
    5. 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.
    6. Frankel, Jeffrey A., 2009. "Environmental Effects of International Trade," Scholarly Articles 4481652, Harvard Kennedy School of Government.
    7. Andrea M. Leiter & Arno Parolini & Hannes Winner, 2009. "Environmental Regulation and Investment: Evidence from European Industries," Working Papers 2009-04, Faculty of Economics and Statistics, University of Innsbruck.
    8. Medalla, Erlinda M. & Lazaro, Dorothea C., 2005. "Does Trade Lead to a Race to the Bottom in Environmental Standards? Another Look at the Issues," Discussion Papers DP 2005-23, Philippine Institute for Development Studies.

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