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Do countries with higher institutional quality transition to cleaner trade?

Jesús Peiró-Palomino, Ernesto Rodríguez-Crespo and Marta Suárez-Varela

Ecological Economics, 2022, vol. 201, issue C

Abstract: There is growing concern about the shift of trade in more polluting products to countries with less restrictive environmental standards, popularly known as pollution havens. This paper explores whether institutional quality affects trade composition and fosters a transition towards cleaner products. Applying a gravity model to a sample of 140 countries for the period 2002–2018, our results show a negative link between institutional quality and trade in products classified as dirty. In addition, the results show a non-linear pattern, with the effects being stronger for countries with high levels of institutional quality. We also examine which dimensions of institutional quality play a more prominent role. Finally, we find that part of the effect of institutional quality is channelled through higher environmental stringency.

Keywords: Dirty trade; Institutional quality; Pollution haven (search for similar items in EconPapers)
JEL-codes: F14 O17 Q50 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.ecolecon.2022.107554

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