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Trade Liberalization and Pollution Intensive Industries in Developing Countries: A Partial Equilibrium Approach

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  • Frank Ackerman
  • Kevin Gallagher

Abstract

Economic theory suggests that liberalization of trade between countries with differing levels of environmental protection could lead pollution-intensive industry to concentrate in the nations where regulations are lax. This effect, often referred to as the "pollution haven" hypothesis, is much discussed in theory, but finds only ambiguous support in empirical research to date. Methodologies used for research on trade and environment differ widely; many are difficult to apply to practical policy questions. We develop a simple, partial equilibrium model explicitly designed to analyze the effects of a change in trade policy. Our model analyzes the relative concentrations of "clean" and "dirty" industries in two nations or regions, before and after the policy change. While lacking the theoretical rigor and mathematical intricacy of other modeling methods, our approach has the advantages of transparency and accessibility to a broad range of analysts and policy makers.

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  • Frank Ackerman & Kevin Gallagher, "undated". "Trade Liberalization and Pollution Intensive Industries in Developing Countries: A Partial Equilibrium Approach," GDAE Working Papers 00-03, GDAE, Tufts University.
    • Handle: RePEc:dae:daepap:00-03
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    References listed on IDEAS

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    2. Dean, Judith M., 1992. "Trade and the environment : a survey of the literature," Policy Research Working Paper Series 966, The World Bank.
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    5. Adam B. Jaffe et al., 1995. "Environmental Regulation and the Competitiveness of U.S. Manufacturing: What Does the Evidence Tell Us?," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 132-163, March.
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    8. Timothy J. Bartik, 2002. "The Effects of Environmental Regulation on Business Location in the United States," Book chapters authored by Upjohn Institute researchers, in: Wayne B. Gray (ed.),Economic Costs and Consequences of Environmental Regulation, pages 129-151, W.E. Upjohn Institute for Employment Research.
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    Cited by:

    1. Paul Lanoie & Jérémy Laurent‐Lucchetti & Nick Johnstone & Stefan Ambec, 2011. "Environmental Policy, Innovation and Performance: New Insights on the Porter Hypothesis," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(3), pages 803-842, September.
    2. Indriya, Soca & Widodo, Tri, 2011. "Do Pollution Havens Exist? Evidence from East Asia," MPRA Paper 79924, University Library of Munich, Germany.
    3. Kevin Gallagher, 2001. "Trade Liberalization and Industrial Pollution in Mexico: Lessons for the FTAA"," International Trade 0106003, University Library of Munich, Germany.
    4. Grant Ferrier, 2010. "The evolution of the environmental industry in the post-NAFTA era in Mexico," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 10(2), pages 147-164, June.
    5. Kakali Mukhopadhyay & Debesh Chakraborty, 2005. "Is liberalization of trade good for the environment? Evidence from India," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 12(1), pages 109-136, June.
    6. Kevin P. Gallagher & Frank Ackerman & Luke Ney, "undated". "Economic Analysis in Environmental Reviews of Trade Agreements: Assessing the North American Experience," GDAE Working Papers 02-01, GDAE, Tufts University.
    7. Dellachiesa, Alejandro E. & Myint, Aung P., 2016. "Trade openness and the changing water polluting intensity patterns of ‘dirty’ and ‘clean’ industrial sectors," Ecological Economics, Elsevier, vol. 129(C), pages 143-151.

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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • O0 - Economic Development, Innovation, Technological Change, and Growth - - General
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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