IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/2524.html
   My bibliography  Save this paper

Racing to the bottom : foreign investment and air pollution in developing countries

Author

Listed:
  • Wheeler, David

Abstract

Critics of free trade have raised the specter of a"race to the bottom,"in which environmental standards collapse because polluters threaten to relocate to"pollution havens"in the developing world. Proponents of this view advocate high, globally uniform standards enforced by punitive trade measures that neutralize the cost advantage of would-be pollution havens. To test the race-to-the-bottom model, the author analyzes recent air quality trends in the United States and in Brazil, China, and Mexico, the three largest recipients of foreign investment in the developing world. The evidence clearly contradicts the model's central prediction. The most dangerous form of air pollution--suspended particulate matter--has actually declined in major cities in all four countries during the era of globalization. Citing recent research, the author argues that the race-to-the-bottom model is flawed because its basic assumptions misrepresent the political economy of pollution control in developing countries. He proposes a more realistic model, in which low-income societies serve their own long-run interests by reducing pollution. He concludes with recommendations for international assistance measures that can improve environmental quality without counterproductive enforcement of uniform standards and trade sanctions.

Suggested Citation

  • Wheeler, David, 2001. "Racing to the bottom : foreign investment and air pollution in developing countries," Policy Research Working Paper Series 2524, The World Bank.
  • Handle: RePEc:wbk:wbrwps:2524
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2001/02/10/000094946_01012705513587/Rendered/PDF/multi_page.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Dasgupta, Susmita & Wheeler, David, 1997. "Citizen complaints as environmental indicators : evidence from China," Policy Research Working Paper Series 1704, The World Bank.
    2. Konar, Shameek & Cohen, Mark A., 1997. "Information As Regulation: The Effect of Community Right to Know Laws on Toxic Emissions," Journal of Environmental Economics and Management, Elsevier, vol. 32(1), pages 109-124, January.
    3. Veena Jha & Anil Markandya & René Vossenaar, 1999. "Reconciling Trade and the Environment," Books, Edward Elgar Publishing, number 1745.
    4. Susmita Dasgupta & Ashoka Mody & Subhendu Roy & David Wheeler, 2001. "Environmental Regulation and Development: A Cross-country Empirical Analysis," Oxford Development Studies, Taylor & Francis Journals, vol. 29(2), pages 173-187.
    5. Lanoie, Paul & Laplante, Benoit & Roy, Maite, 1997. "Can capital markets create incentives for pollution control?," Policy Research Working Paper Series 1753, The World Bank.
    6. 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.
    7. Pargal, Sheoli & Wheeler, David, 1996. "Informal Regulation of Industrial Pollution in Developing Countries: Evidence from Indonesia," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1314-1327, December.
    8. Glen Dowell & Stuart Hart & Bernard Yeung, 2000. "Do Corporate Global Environmental Standards Create or Destroy Market Value?," Management Science, INFORMS, vol. 46(8), pages 1059-1074, August.
    9. Paul Lanoie & Benoit Laplante & Maité Roy, 1997. "Can Capital Markets Create Incentives for Pollution Control?," CIRANO Working Papers 97s-05, CIRANO.
    10. Revesz, Richard L. & Stavins, Robert N., 2007. "Environmental Law," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 1, chapter 8, pages 499-589, Elsevier.
    11. Dasgupta, Susmita & Hua Wang & Wheeler, David, 1997. "Surviving success : policy reform and the future of industrial pollution in China," Policy Research Working Paper Series 1856, The World Bank.
    12. Hartman, Raymond S. & Huq, Mainul & Wheeler,David R., 1997. "Why paper mills clean up : determinants of pollution abatement in four Asian countries," Policy Research Working Paper Series 1710, The World Bank.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Susmita Dasgupta & Benoit Laplante & Hua Wang & David Wheeler, 2002. "Confronting the Environmental Kuznets Curve," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 147-168, Winter.
    2. Madhu Khanna, 2001. "Non‐Mandatory Approaches to Environmental Protection," Journal of Economic Surveys, Wiley Blackwell, vol. 15(3), pages 291-324, July.
    3. Dinda, Soumyananda, 2004. "Environmental Kuznets Curve Hypothesis: A Survey," Ecological Economics, Elsevier, vol. 49(4), pages 431-455, August.
    4. Dasgupta, Susmita & Hettige, Hemamala & Wheeler, David, 2000. "What Improves Environmental Compliance? Evidence from Mexican Industry," Journal of Environmental Economics and Management, Elsevier, vol. 39(1), pages 39-66, January.
    5. Dasgupta, Susmita & Laplante, Benoit & Mamingi, Nlandu, 1998. "Capital markets responses to environmental performance in developing countries," Policy Research Working Paper Series 1909, The World Bank.
    6. Nordström, Håkan & Vaughan, Scott, 1999. "Trade and the environment," WTO Special Studies, World Trade Organization (WTO), Economic Research and Statistics Division, volume 4, number 4.
    7. Stefan Ambec & Paul Lanoie, 2007. "When and Why Does It Pay To Be Green?," CIRANO Working Papers 2007s-20, CIRANO.
    8. Dasgupta, Susmita & Meisner, Craig & Wheeler, David & Jin, Yanhong, 2002. "Agricultural Trade, Development and Toxic Risk," World Development, Elsevier, vol. 30(8), pages 1401-1412, August.
    9. Stavins, Robert N., 2003. "Experience with market-based environmental policy instruments," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 1, chapter 9, pages 355-435, Elsevier.
    10. Caplan, Arthur J., 2003. "Reputation and the control of pollution," Ecological Economics, Elsevier, vol. 47(2-3), pages 197-212, December.
    11. Francesco Nicolli & Francesco Vona & Lionel Nesta, 2012. "Determinants of Renewable Energy Innovation: Environmental Policies vs. Market Regulation," Working Papers 201204, University of Ferrara, Department of Economics.
    12. Copeland, Brian R., 2005. "Policy Endogeneity and the Effects of Trade on the Environment," Agricultural and Resource Economics Review, Cambridge University Press, vol. 34(1), pages 1-15, April.
    13. repec:hal:spmain:info:hdl:2441/eu4vqp9ompqllr09j0h0ji242 is not listed on IDEAS
    14. Stavins, Robert & Hahn, Robert & Cavanagh, Sheila, 2001. "National Environmental Policy During the Clinton Years," RFF Working Paper Series dp-01-38, Resources for the Future.
    15. Hettige, Hemamala & Mani, Muthukumara & Wheeler, David, 2000. "Industrial pollution in economic development: the environmental Kuznets curve revisited," Journal of Development Economics, Elsevier, vol. 62(2), pages 445-476, August.
    16. Stavins, Robert, 2004. "Environmental Economics," RFF Working Paper Series dp-04-54, Resources for the Future.
    17. Forest L. Reinhardt & Robert N. Stavins & Richard H. K. Vietor, 2008. "Corporate Social Responsibility Through an Economic Lens," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 2(2), pages 219-239, Summer.
    18. Dasgupta, Susmita & Laplante, Benoit & Namingi, Nlandu & Hua Wang, 2000. "Industrial environmental performance in China - the impact of inspections," Policy Research Working Paper Series 2285, The World Bank.
    19. Linda Bui, 2005. "Public Disclosure of Private Information as a Tool for Regulating Environmental Emissions: Firm-Level Responses by Petroleum Refineries to the Toxics Release Inventory," Working Papers 05-13, Center for Economic Studies, U.S. Census Bureau.
    20. Paul Lanoie & Jérôme Moreau & Georges A. Tanguay, 2001. "Environmental Policy, Public Interest and Political Market," CIRANO Working Papers 2001s-37, CIRANO.
    21. Solan, Eilon & Zhao, Chang, 2023. "When (not) to publicize inspection results," Journal of Economic Theory, Elsevier, vol. 210(C).

    More about this item

    Keywords

    Environmental Economics&Policies; Water and Industry; Health Monitoring&Evaluation; Pollution Management&Control; Sanitation and Sewerage;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:2524. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.