Environmental Regulation and International Trade: Empirical Results for the Manufacturing Industry in Germany, the Netherlands and the US, 1972 - 1992
London School of Economics & Political Science (LSE) - Department of Economic History
Raymond J.G.M. Florax
Purdue University; VU University Amsterdam - Department of Spatial Economics
Free University of Amsterdam; Tilburg University
Tinbergen Institute Discussion Paper No. TI 2004-020/3
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.
Number of Pages in PDF File: 35
Keywords: Trade, competitiveness, environmental policy, pollution abatement, pollution haven
JEL Classification: F14, L50, Q28working papers series
Date posted: February 28, 2004
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