Unmasking the Pollution Haven Effect

Arik Levinson and M. Scott Taylor

No 10629, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper uses both theory and empirical work to examine the effect of environmental regulations on trade flows. We develop a simple economic model to demonstrate how unobserved heterogeneity, endogeneity and aggregation issues bias measurements of the relationship between regulatory costs and trade. We apply an estimating equation derived from the model to data on U.S. regulations and net trade flows among the U.S., Canada, and Mexico, for 130 manufacturing industries from 1977 to 1986. Our results indicate that industries whose abatement costs increased most experienced the largest increases in net imports. For the 20 industries hardest hit by regulation, the change in net imports we ascribe to the increase in regulatory costs amounts to more than half of the total increase in trade volume over the period.

JEL-codes: F18 Q38 (search for similar items in EconPapers)
Date: 2004-07
New Economics Papers: this item is included in nep-env
Note: ITI EEE
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Citations: View citations in EconPapers (47)

Published as Arik Levinson & M. Scott Taylor, 2008. "Unmasking The Pollution Haven Effect," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 223-254, 02.

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Related works:
Journal Article: UNMASKING THE POLLUTION HAVEN EFFECT (2008)
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