Does the 'California-Effect' Operate Across Borders? Trading and Investing-Up in Automobile Emission Standards

Journal of European Public Policy, 19 (2), 2012, pp. 217-237

38 Pages Posted: 19 Jul 2010 Last revised: 5 Aug 2012

See all articles by Eric Neumayer

Eric Neumayer

London School of Economics and Political Science (LSE)

Richard Perkins

London School of Economics & Political Science (LSE)

Date Written: 2010

Abstract

The ‘California effect’ hypothesis posits that economic integration may lead to the ratcheting upwards of regulatory standards towards levels found in higher-regulating jurisdictions. Although a number of previous large sample quantitative studies have investigated such convergence dynamics for public environmental policies, their results have been based exclusively on geographically and sectorally aggregated data. Our contribution advances on these studies. We provide the first large-N, geographically disaggregated evidence consistent with a trading-up effect: exports of automobiles and related components from developing countries to countries with more stringent auto emission standards are found to be associated with more stringent domestic emission standards. Investing-up dynamics are also apparent, with aggregate inward FDI into host developing economies’ automotive sector increasing the likelihood of more stringent emission standards domestically.

Keywords: Automobiles, California effect, convergence, investing-up, standards, trading-up

Suggested Citation

Neumayer, Eric and Perkins, Richard, Does the 'California-Effect' Operate Across Borders? Trading and Investing-Up in Automobile Emission Standards (2010). Journal of European Public Policy, 19 (2), 2012, pp. 217-237. Available at SSRN: https://ssrn.com/abstract=1644728

Eric Neumayer (Contact Author)

London School of Economics and Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom
+44 207 955 7598 (Phone)
+44 207 955 7412 (Fax)

HOME PAGE: http://personal.lse.ac.uk/neumayer

Richard Perkins

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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