Institutions, Comparative Advantage, and the Environment

Joseph Shapiro

Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

Abstract: This paper proposes that strong financial, judicial, and labor market institutions provide comparative advantage in clean industries, and thereby improve a country’s environmental quality. Five complementary tests support this hypothesis. First, industries that depend on institutions are disproportionately clean. Second, strong institutions increase relative exports in clean industries, even conditional on environmental regulation and factor endowments. Third, an industry’s complexity helps explain the link between institutions and clean goods. Fourth, a quantitative general equilibrium model indicates that strengthening a country’s institutions decreases its pollution through relocating dirty industries abroad, though increases pollution in other countries. Fifth, cross-country differences in the composition of output between clean and dirty industries explain more of the global distribution of emissions than differences in the techniques used for production do. The comparative advantage that strong institutions provide in clean industries gives one under-explored reason why developing countries have relatively high pollution levels.

Keywords: Social and Behavioral Sciences; institutions; comparative advantage; pollution (search for similar items in EconPapers)
Date: 2024-01-11
New Economics Papers: this item is included in nep-ene, nep-env, nep-hme, nep-int and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.escholarship.org/uc/item/17g3r8m5.pdf;origin=repeccitec (application/pdf)

Related works:
Working Paper: Institutions, Comparative Advantage, and the Environment (2023)
Working Paper: Institutions, Comparative Advantage, and the Environment (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cdl:agrebk:qt17g3r8m5

Access Statistics for this paper

More papers in Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley Contact information at EDIRC.
Bibliographic data for series maintained by Lisa Schiff ().