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
Date Written: February 2004
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: Suggested Citation