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Pollution Haven Effect with Heterogeneous Firms

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  • Zhang, Hongliang

Abstract

I developed a heterogeneous firm model to examine pollution haven effect within the industry. Environmental regulation reduces the number of domestic firms in the industry by forcing the least productive firms out, and shifts the domestic firms into the foreign country. Although there are resource allocations between firms, total welfare is decreasing due to the stringency of regulation. The impact of environmental regulation on the competitiveness is dependent on the relative size of abatement cost to marginal production cost and regulation regimes.

Suggested Citation

  • Zhang, Hongliang, 2013. "Pollution Haven Effect with Heterogeneous Firms," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150781, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea13:150781
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    References listed on IDEAS

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    1. Daniel J. Henderson & Daniel L. Millimet, 2007. "Pollution Abatement Costs and Foreign Direct Investment Inflows to U.S. States: A Nonparametric Reassessment," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 178-183, February.
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    3. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-1721, September.
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    5. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    6. Randy Becker & Vernon Henderson, 2000. "Effects of Air Quality Regulations on Polluting Industries," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 379-421, April.
    7. John A. List & Daniel L. Millimet & Per G. Fredriksson & W. Warren McHone, 2003. "Effects of Environmental Regulations on Manufacturing Plant Births: Evidence from a Propensity Score Matching Estimator," The Review of Economics and Statistics, MIT Press, pages 944-952.
    8. Xu, Xinpeng, 1999. "Do Stringent Environmental Regulations Reduce the International Competitiveness of Environmentally Sensitive Goods? A Global Perspective," World Development, Elsevier, vol. 27(7), pages 1215-1226, July.
    9. Siebert, Horst, 1977. "Environmental Quality and the Gains from Trade," Kyklos, Wiley Blackwell, vol. 30(4), pages 657-673.
    10. Tobey, James A, 1990. "The Effects of Domestic Environmental Policies on Patterns of World Trade: An Empirical Test," Kyklos, Wiley Blackwell, vol. 43(2), pages 191-209.
    11. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, pages 300-316.
    12. van Beers, Cees & van den Bergh, Jeroen C J M, 1997. "An Empirical Multi-country Analysis of the Impact of Environmental Regulations on Foreign Trade Flows," Kyklos, Wiley Blackwell, vol. 50(1), pages 29-46.
    13. Ravi Ratnayake, 1998. "Do Stringent Environmental Regulations Reduce International Competitiveness? Evidence from an Inter-industry A nalysis," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 5(1), pages 77-96.
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    More about this item

    Keywords

    Heterogeneous firms; Pollution Haven Effect; Environmental regulation; Environmental Economics and Policy; Research and Development/Tech Change/Emerging Technologies;

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