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

Author

Listed:
  • Frank Ackerman

    (The Global Development And Environment Institute at Tufts Universty)

  • Kevin Gallagher

    (The Global Development And Environment Institute at Tufts Universty)

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.

Suggested Citation

  • Frank Ackerman & Kevin Gallagher, 2001. "Trade Liberalization and Pollution Intensive Industries in Developing Countries: A Partial Equilibrium Approach," International Trade 0106004, EconWPA.
  • Handle: RePEc:wpa:wuwpit:0106004 Note: Type of Document - PDF; pages: 21; figures: n/a. This paper was published in Methodologies for Assessing the Environmental Impacts of Trade Liberalization Agreements. Dale Andrews, ed. (Paris: OECD, 2000). It has been reprinted with permission. Other working papers available at www.gdae.org
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    File URL: http://econwpa.repec.org/eps/it/papers/0106/0106004.pdf
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    References listed on IDEAS

    as
    1. Timothy J. Bartik, 2010. "Small Business Start-Ups in the United States: Estimates of the Effects of Characteristics of States," Book chapters authored by Upjohn Institute researchers,in: Zolton Acs (ed.), Entrepreneurship and regional Development, pages 155-169 W.E. Upjohn Institute for Employment Research.
    2. Dean, Judith M., 1992. "Trade and the environment : a survey of the literature," Policy Research Working Paper Series 966, The World Bank.
    3. Frank Ackerman, 2001. "Still dead after all these years: interpreting the failure of general equilibrium theory," Journal of Economic Methodology, Taylor & Francis Journals, vol. 9(2), pages 119-139.
    4. 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.
    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.
    6. Levinson, Arik, 1996. "Environmental regulations and manufacturers' location choices: Evidence from the Census of Manufactures," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 5-29, October.
    7. Eskeland, Gunnar S. & Harrison, Ann E., 2003. "Moving to greener pastures? Multinationals and the pollution haven hypothesis," Journal of Development Economics, Elsevier, pages 1-23.
    8. Revesz, Richard L. & Stavins, Robert N., 2007. "Environmental Law," Handbook of Law and Economics, Elsevier.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. 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.
    2. Kevin P. Gallagher & Frank Ackerman & Luke Ney, "undated". "02-01 "Economic Analysis in Environmental Reviews of Trade Agreements: Assessing the North American Experience"," GDAE Working Papers 02-01, GDAE, Tufts University.

    More about this item

    Keywords

    trade liberalization; partial equilibrium; pollution haven; trade; environmental policy; NAFTA;

    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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