Environmental Regulation and International Trade: Empirical Results for the Manufacturing Industry in Germany, the Netherlands and the Us, 1972 - 1992

Tinbergen Institute Discussion Paper No. TI 2004-020/3

35 Pages Posted: 28 Feb 2004

See all articles by Abay Mulatu

Abay Mulatu

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; Tinbergen Institute

Cees Withagen

Free University of Amsterdam; Tilburg University

Date Written: February 2004

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.

Keywords: Trade, competitiveness, environmental policy, pollution abatement, pollution haven

JEL Classification: F14, L50, Q28

Suggested Citation

Mulatu, Abay and Florax, Raymond J.G.M. and Withagen, Cees A. M., Environmental Regulation and International Trade: Empirical Results for the Manufacturing Industry in Germany, the Netherlands and the Us, 1972 - 1992 (February 2004). Tinbergen Institute Discussion Paper No. TI 2004-020/3. Available at SSRN: https://ssrn.com/abstract=508903 or http://dx.doi.org/10.2139/ssrn.508903

Abay Mulatu

London School of Economics & Political Science (LSE) - Department of Economic History ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Raymond J.G.M. Florax

Purdue University ( email )

West Lafayette, IN 47907-1145
United States
(765) 494-4300 (Phone)
(765) 494-9176 (Fax)

HOME PAGE: http://web.ics.purdue.edu/~rflorax/

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands
+31 20 444 6092 (Phone)
+31 20 444 6004 (Fax)

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Cees A. M. Withagen (Contact Author)

Free University of Amsterdam ( email )

Tinbergen Institute De Boelelaan 1105
1081 HV Amsterdam
Netherlands

Tilburg University ( email )

Postbus 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

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