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Environmental Regulation and Competitiveness: Evidence from Trade and Production in the Manufacturing Sector

Tsung Yu Yang

No 176181, 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota from Agricultural and Applied Economics Association

Abstract: Previous empirical studies of the pollution haven hypothesis (PHH) have not reached a consistent conclusion. The existing literature is primarily based on anecdotes and scattered case studies. This study analyzes the trade flows and composition change of the most polluting industries in manufacturing sectors among countries in order to offer a more general conclusion. This study finds that stricter environmental regulation stringency decreases the net export and production share of the most polluting production, which provides the evidence for pollution haven effect (PHE). However, we find no evidence to support PHH. Contrary, we find stricter environmental regulation stringency corresponds to larger net export and polluting production as trade openness increases. We also find that the ability to innovate in environmental-related technology creates a comparative advantage in polluting production. This finding implies that governments do not have to constrain their policies on the tradeoff between pollution control and international competitiveness since the innovative ability may both obtain the goals of pollution control and strengthening international competitiveness.

Keywords: Environmental Economics and Policy; International Relations/Trade (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-env, nep-int and nep-res
Date: 2014-07
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