Can Rich Countries Become Pollution Havens?

Victoria I. Umanskaya and Edward B. Barbier ()

Review of International Economics, 2008, vol. 16, issue 4, pages 627-640

Abstract: This paper bridges the gap between two-country Ricardian trade models where differences in environmental policies create pollution havens in a poorer region with weaker pollution regulations, and 2 × 2 Heckscher-Ohlin models that predict under certain conditions that pollution havens may occur in a richer region with tighter regulations. By relaxing the Heckscher-Ohlin assumptions of factor price equalization and no specialization, we show how creation of pollution havens in either region is possible, due to the interplay of policy and factor-endowment motives. We also analyze the conditions for creating pollution havens in the cases of exogenous and endogenous environmental policy. Copyright © 2008 The Authors. Journal compilation © 2008 Blackwell Publishing Ltd.

Date: 2008

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