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Environmental Policy Stringency, Technical Progress and Pollution Haven Hypothesis

Elkhan Richard Sadik-Zada () and Mattia Ferrari ()
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Elkhan Richard Sadik-Zada: Institute of Development Research and Development Policy, Ruhr-University, 44801 Bochum, Germany
Mattia Ferrari: Centre for Studies on European Economy (AIM), Azerbaijan State University of Economics (UNEC), Baku 1001, Azerbaijan

Sustainability, 2020, vol. 12, issue 9, 1-20

Abstract: The present inquiry provides a common ground for the analysis of two strands of literature, the environmental Kuznets curve (EKC) and the pollution haven hypothesis (PHH). To this end, the study sets out a simple variational model, which identifies the structural composition of the economy and the level of economic development as the primary determinants of the magnitude of the domestic environmental degradation. The juxtaposition of the mentioned literature strands undermines the optimistic view that economic growth, in the long run, leads to the reduction of atmospheric pollution. To assess the empirical validity of the pollution haven conjecture, the study employs the OECD Environmental Policy Stringency Index and the refined data on carbon emissions embodied in imports for the dataset of 26 OECD countries in the time interval between 1995 and 2011. By employing pooled mean group (PMG) estimators, the study, for the first time, accounts for a number of issues mentioned in the literature as factors that confine the inferential power of existing empirical studies on the EKC. The strong and robust confirmation of the pollution haven conjecture indicates that at least in the context of global common pool resources, a purely national perspective of the EKC is not satisfactory.

Keywords: environmental policy stringency; carbon leakage; pollution havens; intensity-of-use hypothesis; development economics; environmental Kuznets curve; calculus of variations; pooled mean group estimator (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2020
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