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Environmental regulation and revealed comparative advantages in Europe: is China a pollution haven?

Daniela Marconi ()

No 67, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: The relocation of more polluting industries in poorer countries due to gaps in environmental standards is known as the pollution haven effect, whereby the scale and the composition of output change across countries. Changes in the composition of the output mix might translate into changes of comparative advantages across countries, as revealed by trade flows. This paper focus on this issue and looks at the changes of bilateral revealed comparative advantages (RCAs) in the last decade between China and the major fourteen EU countries (EU14). Using industry level data on bilateral trade, air pollution, water pollution and several measures of environmental stringency, we find that, controlling for other factors that may have affected RCAs, such as labor costs, on average our EU14 countries have kept or improved their advantages with respect to China in both water polluting industries (such as paper and agro-based industries) and air polluting industries (such as basic metals and chemicals), while they have lost competitiveness in the more clean industries (such as machinery and fabricated metals).

Keywords: revealed comparative advantages; environmental regulation; industrial pollution (search for similar items in EconPapers)
JEL-codes: F14 F18 (search for similar items in EconPapers)
Date: 2010-06
New Economics Papers: this item is included in nep-env, nep-eur, nep-int, nep-reg and nep-tra
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Journal Article: Environmental Regulation and Revealed Comparative Advantages in Europe: Is China a Pollution Haven? (2012) Downloads
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