Unmasking the Pollution Haven Effect

46 Pages Posted: 4 Aug 2004 Last revised: 18 Jul 2022

See all articles by Arik Levinson

Arik Levinson

Georgetown University - Department of Economics; National Bureau of Economic Research (NBER)

M. Scott Taylor

University of Calgary - Department of Economics

Date Written: July 2004

Abstract

This paper uses both theory and empirical work to examine the effect of environmental regulations on trade flows. We develop a simple economic model to demonstrate how unobserved heterogeneity, endogeneity and aggregation issues bias measurements of the relationship between regulatory costs and trade. We apply an estimating equation derived from the model to data on U.S. regulations and net trade flows among the U.S., Canada, and Mexico, for 130 manufacturing industries from 1977 to 1986. Our results indicate that industries whose abatement costs increased most experienced the largest increases in net imports. For the 20 industries hardest hit by regulation, the change in net imports we ascribe to the increase in regulatory costs amounts to more than half of the total increase in trade volume over the period.

Suggested Citation

Levinson, Arik M. and Taylor, Michael Scott, Unmasking the Pollution Haven Effect (July 2004). NBER Working Paper No. w10629, Available at SSRN: https://ssrn.com/abstract=565828

Arik M. Levinson (Contact Author)

Georgetown University - Department of Economics ( email )

Washington, DC 20057
United States
202-687-5571 (Phone)
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National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
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United States

Michael Scott Taylor

University of Calgary - Department of Economics ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada

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