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Do Countries with Lax Environmental Regulations Have a Comparative Advantage in Polluting Industries?

Miguel Quiroga Suazo, Martin Persson and Thomas Sterner
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Martin Persson: Department of Energy and Environment Chalmers University of Technology Sweden

No 03-2009, Working Papers from Departamento de Economía, Universidad de Concepción

Abstract: We study whether lax environmental regulations induce comparative advantages, causing the least-regulated countries to specialize in polluting industries. We seek to improve three areas in the empirical literature based on the Heckscher-Ohlin-Vanek’s factor content of trade, more specifically in Tobey’s (1990) approach: the measurement of environmental endowments, the possible endogeneity due to an omitted variable that has not been considered, and the influence of the industrial level of aggregation. For the econometrical analysis, we use a cross-section of 71 countries to examine the net exports in the most polluting industries in the year 2000. As a result, we find that industrial aggregation matters and we find some evidence in favor of the pollution-haven effect.

Keywords: trade; comparative advantage; pollution haven; environmental endowment; environmental regulation; Porter hypothesis; factor content; aggregation bias; nonhomothetic preferences. (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-env, nep-lam, nep-reg and nep-res
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