Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2004-02-17
Number: 04-020/3
Author-Name: Abay Mulatu
Author-Email: A.Mulatu@lse.ac.uk
Author-Workplace-Name: London School of Economics, London
Author-Name: Raymond J.G.M. Florax
Author-Email: rflorax@feweb.vu.nl
Author-Workplace-Name: Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam
Author-Name: Cees A. Withagen
Author-Email: cwithagen@feweb.vu.nl
Author-Workplace-Name: Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam
Title: Environmental Regulation and International Trade
Abstract: We empirically investigate the responsiveness of international trade to the stringency of environmental regulation. Stringent environmental regulation may impair the export competitiveness of ‘dirty’ domestic industries, and as a result, ‘pollution havens’ emerge in countries where environmental regulation is ‘over-lax.’ We examine the impact of pollution abatement and control costs on net exports in order to grasp this phenomenon. Theoretically, our analysis is related to a general equilibrium model of trade and pollution nesting the pollution haven motive for trade with the factor endowment motive. We analyze data on two-digit ISIC manufacturing industries during the period 1977–1992 in Germany, the Netherlands and the US, and show that trade patterns in ‘dirty’ commodities are jointly determined by relative factor endowments and environmental stringency differentials.
Classification-JEL: F14; L50; Q28
Keywords: Trade; competitiveness;  environmental policy; pollution abatement; pollution haven
File-Url: https://papers.tinbergen.nl/04020.pdf
File-Format: application/pdf
File-Size: 485435 bytes
Handle: RePEc:tin:wpaper:20040020