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Have Countries with Lax Environmental Regulations a Comparative Advantage in Polluting Industries?

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  • Quiroga, Miguel
  • Sterner, Thomas
  • Persson, Martin

Abstract

We aim to study whether lax environmental regulations induce comparative advantages, causing the least-regulated countries to specialize in polluting industries. The study is based on Trefler and Zhu’s (2005) definition of the factor content of trade. For the econometrical analysis, we use a cross-section of 71 countries in 2000 to examine the net exports in the most polluting industries. We try to overcome three weaknesses in the empirical literature: the measurement of environmental endowments or environmental stringency, the possible endogeneity of the explanatory variables, and the influence of the industrial level of aggregation. As a result, we do find some evidence in favor of the pollution-haven effect. The exogeneity of the environmental endowments was rejected in several industries, and we also find that industrial aggregation matters.

Suggested Citation

  • Quiroga, Miguel & Sterner, Thomas & Persson, Martin, 2007. "Have Countries with Lax Environmental Regulations a Comparative Advantage in Polluting Industries?," Discussion Papers dp-07-08, Resources For the Future.
  • Handle: RePEc:rff:dpaper:dp-07-08
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    References listed on IDEAS

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    Cited by:

    1. Schoenherr, Tobias, 2012. "The role of environmental management in sustainable business development: A multi-country investigation," International Journal of Production Economics, Elsevier, vol. 140(1), pages 116-128.
    2. 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.

    More about this item

    Keywords

    comparative advantage; environmental regulation; trade; pollution haven; Porter hypothesis;

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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