Unravelling the Worldwide Pollution Haven Effect

41 Pages Posted: 21 Nov 2011

See all articles by Jean-Marie Grether

Jean-Marie Grether

University of Neuchatel - Institute for Economic and Regional Research (IRER)

Nicole A. Mathys

Government of the Swiss Confederation - Swiss Federal Office of Energy; University of Neuchatel

Jaime de Melo

University of Geneva - Department of Political Economics; Centre for Economic Policy Research (CEPR); World Bank

Date Written: November 21, 2011

Abstract

This paper tackles the 'pollution haven' argument by estimating the pollution content of imports (PCI). The PCI is then decomposed into three components: a 'deep' component (i.e. traditional variables unrelated to the environmental debate); a factor endowment component and a 'pollution haven' component reflecting the impact of differences in environmental policies. The estimation is carried out for 1987 for an extensive data set covering 10 pollutants, 48 countries and 79 ISIC 4-digit sectors. Decompositions based on cross-section econometric estimates suggest a significant pollution haven effect which increases the PCI of the North because of stricter environmental regulations in the North. At the same time, the factor endowment effect lowers the PCI of the North, as the North is relatively well-endowed in capital and pollution-intensive activities are capital intensive. On a global scale, because the bulk of trade is intra-regional with a high North-North share, these effects are small relative to the 'deep' determinants of the worldwide PCI. In sum, differences in factor endowments and environmental policies have only marginally affected the PCI of world trade at the end of the eighties.

Keywords: trade and the environment, pollution haven effect, factor endowment effect

JEL Classification: F18, Q56

Suggested Citation

Grether, Jean-Marie and Mathys, Nicole A. and de Melo, Jaime, Unravelling the Worldwide Pollution Haven Effect (November 21, 2011). FEEM Working Paper No. 75.2011, Available at SSRN: https://ssrn.com/abstract=1962482 or http://dx.doi.org/10.2139/ssrn.1962482

Jean-Marie Grether (Contact Author)

University of Neuchatel - Institute for Economic and Regional Research (IRER) ( email )

Pierre-a-Mazel 7
Neuchatel, CH-2000
Switzerland
+41 32 718 13 56 (Phone)
+41 32 718 14 01 (Fax)

Nicole A. Mathys

Government of the Swiss Confederation - Swiss Federal Office of Energy

Berne
Switzerland

University of Neuchatel

1, A.-L. Breguet
Neuchatel, CH-2000
Switzerland

Jaime De Melo

University of Geneva - Department of Political Economics ( email )

40, boulevard du Pont-d'Arve
Geneva 4, CH-1211
Switzerland
+41 22 705 8273 (Phone)
+41 22 705 8293 (Fax)

HOME PAGE: http://www.unige.ch/ses/ecopo/demelo/Jaime.html

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

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