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The impact of environmental policy on international competitiveness in manufacturing

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  • Ashfaqul Babool
  • Michael Reed

Abstract

The aim of this study is to test the hypothesis that environmental stringency adversely affects the international competitiveness (net exports) in manufacturing sectors. The model follows the standard factor endowment approach to explain the effects of environmental regulatory policy on net exports in different product-based industries. An econometric model is constructed, which includes factor endowments and environmental regulations to examine how strict environmental policies impact export competitiveness. A panel dataset of 10 Organisation for Economic Co-operation and Development (OECD) countries, over 17 years, 1987-2003, was constructed for the modelling effort. The study finds that environmental regulations can be a way to combat the flight of manufacturing out of developed countries if the output from these industries can be identified as environmentally friendly. A positive relationship between net exports and environmental regulations was found for paper products, wood products and textile products. However, most manufacturing industries are harmed by increased environmental regulations.

Suggested Citation

  • Ashfaqul Babool & Michael Reed, 2010. "The impact of environmental policy on international competitiveness in manufacturing," Applied Economics, Taylor & Francis Journals, vol. 42(18), pages 2317-2326.
    • Handle: RePEc:taf:applec:v:42:y:2010:i:18:p:2317-2326
    DOI: 10.1080/00036840701858026
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    References listed on IDEAS

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    1. Jenkins, Rhys, 1998. "Environmental Regulation and International Competitiveness: A Review of Literature and Some European Evidence," UNU-INTECH Discussion Paper Series 1998-01, United Nations University - INTECH.
    2. Low, P., 1992. "International Trade and the Environment," World Bank - Discussion Papers 159, World Bank.
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    Cited by:

    1. Lakatos, Csilla & Walmsley, Terrie, 2011. "Dispute Settlement at the WTO: Impacts of a No Deal in the US-Brazil Cotton Dispute," Conference papers 332059, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. repec:old:wpaper:338 is not listed on IDEAS
    3. Caglar, Abdullah Emre & Askin, Bekir Emre, 2023. "A path towards green revolution: How do competitive industrial performance and renewable energy consumption influence environmental quality indicators?," Renewable Energy, Elsevier, vol. 205(C), pages 273-280.
    4. Christoph Böhringer & Victoria Alexeeva-Talebi, 2011. "Unilateral climate policy and competitiveness: The implications of differential emission pricing," Working Papers V-338-11, University of Oldenburg, Department of Economics, revised Jun 2011.
    5. Dalia Fadly, 2020. "Greening Industry in Vietnam: Environmental Management Standards and Resource Efficiency in SMEs," Sustainability, MDPI, vol. 12(18), pages 1-27, September.
    6. Fernando E. Garcia-Muiña & Rocío González-Sánchez & Anna Maria Ferrari & Davide Settembre-Blundo, 2018. "The Paradigms of Industry 4.0 and Circular Economy as Enabling Drivers for the Competitiveness of Businesses and Territories: The Case of an Italian Ceramic Tiles Manufacturing Company," Social Sciences, MDPI, vol. 7(12), pages 1-31, December.
    7. Azam, Sardor, 2016. "Trade and Environment: Do Spatial Effects Matter?," MPRA Paper 73113, University Library of Munich, Germany, revised Jun 2016.
    8. Zhou, Fengxiu & Wen, Huwei & Lee, Chien-Chiang, 2022. "Broadband infrastructure and export growth," Telecommunications Policy, Elsevier, vol. 46(5).
    9. Tsurumi Tetsuya & Managi Shunsuke & Hibiki Akira, 2015. "Do Environmental Regulations Increase Bilateral Trade Flows?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(4), pages 1549-1577, October.
    10. Andrea Fabrizi & Marco Gentile & Giulio Guarini & Valentina Meliciani, 2024. "The impact of environmental regulation on innovation and international competitiveness," Journal of Evolutionary Economics, Springer, vol. 34(1), pages 169-204, January.

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