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Unravelling the Worldwide Pollution Haven Effect

In: Developing Countries in the World Economy

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  • Jean-Marie Grether
  • Nicole Andréa Mathys
  • Jaime de Melo

Abstract

This paper tackles the 'pollution haven' argument by estimating the pollution content of imports (PCl). The PCl is then decomposed into three components: (i) a 'deep' component (i.e. traditional variables unrelated to the environmental debate); (ii) a factor endowment component and (iii) a 'pollution haven' component reflecting the impact of differences in environmental policies. The estimation is carried out for 1987 for an extensive data set covering 10 pollutants, 48 countries and 79 lSIC four-digit sectors. Decompositions based on cross-section econometric estimates suggest a significant pollution haven effect, which increases the PCl of the North because of stricter environmental regulations in the North. At the same time, the factor endowment effect lowers the PCl of the North, as the North is relatively well-endowed in capital and pollution-intensive activities are capital intensive. On a global scale, because the bulk of trade is intra-regional with a high North-North share, these effects are small relative to the 'deep' determinants of the worldwide PCl. Robustness checks performed on a more recent dataset, but limited to sulphur dioxide, confirm these results. In sum, differences in factor endowments and environmental policies only marginally affected the PCl of world trade at the end of the 1980s.

Suggested Citation

  • Jean-Marie Grether & Nicole Andréa Mathys & Jaime de Melo, 2015. "Unravelling the Worldwide Pollution Haven Effect," World Scientific Book Chapters,in: Developing Countries in the World Economy, chapter 23, pages 581-612 World Scientific Publishing Co. Pte. Ltd..
  • Handle: RePEc:wsi:wschap:9789814494908_0023
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    Cited by:

    1. Nicole A. MATHYS & Jaime DE MELO, 2011. "The Political Economy of Climate Change Policies: Political Economy Aspects of Climate Change Mitigation Efforts," Working Papers P24, FERDI.
    2. Nicole A. MATHYS & Jaime DE MELO, 2012. "Reconciling Trade and Climate Policies," Working Papers P37, FERDI.
    3. Grether, Jean-Marie & Mathys, Nicole A., 2013. "The pollution terms of trade and its five components," Journal of Development Economics, Elsevier, vol. 100(1), pages 19-31.
    4. Jean-Marie Grether & Nicole Andréa Mathys & Jaime de Melo, 2015. "Unravelling the Worldwide Pollution Haven Effect," World Scientific Book Chapters,in: Developing Countries in the World Economy, chapter 23, pages 581-612 World Scientific Publishing Co. Pte. Ltd..
    5. Jean-Marie Grether & Nicole A. Mathys & Jaime de Melo, 2007. "Trade, Technique and Composition Effects: What is Behind the Fall in World-Wide SO2 Emissions 1990-2000?," Working Papers 2007.93, Fondazione Eni Enrico Mattei.
    6. Mireille Chiroleu-Assouline, 2015. "La fiscalité environnementale en France peut-elle devenir réellement écologique ?. État des lieux et conditions d’acceptabilité," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(3), pages 129-165.
    7. Nicole A. MATHYS & Jaime DE MELO, 2010. "Trade and Climate Change: The Challenges Ahead," Working Papers P14, FERDI.
    8. Thais NUNEZ-ROCHA & Inmaculada MARTíNEZ-ZARZOSO, 2018. "Is National Environmental Legislation Affecting Emissions?," LEO Working Papers / DR LEO 2505, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    9. Ivan Tilov & Benjamin Volland & Mehdi Farsi, 2017. "Interactions in Swiss Households' Energy Demand: A Holistic Approach," IRENE Working Papers 17-11, IRENE Institute of Economic Research.
    10. Jaime de Melo & Nicole A. Mathys, 2012. "Concilier les politiques commerciales et les politiques climatiques," Revue d’économie du développement, De Boeck Université, vol. 20(2), pages 57-81.
    11. John McCollough & Miao He & Arzu Tay Bayramoglu, 2016. "Pollution Havens and Their Relationship to the Environmental Kuznets Curve: The Case of the us Tyre Industry," Economic Affairs, Wiley Blackwell, vol. 36(3), pages 258-272, October.
    12. de Melo, Jaime, 2012. "Trade in a'green growth'development strategy : global scale issues and challenges," Policy Research Working Paper Series 6236, The World Bank.
    13. Horatiu A. Rus, 2016. "Renewable Resources, Pollution and Trade," Review of International Economics, Wiley Blackwell, vol. 24(2), pages 364-391, May.
    14. Massimiliano Mazzanti & Anna Montini & Roberto Zoboli, 2007. "Economic Dynamics, Emission Trends and the EKC Hypothesis New Evidence Using NAMEA and Provincial Panel Data for Italy," Working Papers 2007.24, Fondazione Eni Enrico Mattei.
    15. Millimet, Daniel L., 2013. "Environmental Federalism: A Survey of the Empirical Literature," IZA Discussion Papers 7831, Institute for the Study of Labor (IZA).
    16. Massimiliano Mazzanti & Anna Montini & Roberto Zoboli, 2008. "Environmental Kuznets Curves for Air Pollutant Emissions in Italy: Evidence from Environmental Accounts (NAMEA) Panel Data," Economic Systems Research, Taylor & Francis Journals, vol. 20(3), pages 277-301.
    17. Chris Milner & Fangya Xu, "undated". "On The Pollution Content of China’s Trade: Clearing the Air?," Discussion Papers 09/19, University of Nottingham, GEP.
    18. Rahel Aichele, 2013. "Trade, Climate Policy and Carbon Leakage - Theory and Empirical Evidence," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 49, March.

    More about this item

    Keywords

    Trade Barriers and Market Structure; Quantitative Restrictions; Political Economy and Migration; Trade and the Environment;

    JEL classification:

    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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