Working Paper: CEPR ID: DP3932
Authors: Jean-Marie Grether; Jaime de Melo
Abstract: This Paper reviews arguments and evidence on the impact of globalization on the environment, then presents evidence on production and international trade flows in five heavily polluting industries for 52 countries over the period 1981-98. A new decomposition of revealed comparative advantage (RCA) according to geographical origin reveals a delocalization to the South for all heavily polluting industries except non-ferrous metals that exhibits South-North delocalization in accordance with factor-abundance driven response to a reduction in trade barriers. Panel estimation of a gravity model of bilateral trade on the same data set reveals that, on average, polluting industries have higher barriers-to-trade costs (except non-ferrous metals with significantly lower barriers to trade) and little evidence of delocalization in response to a North-South regulatory gap.
Keywords: gravity model; revealed comparative advantage; trade; environment
JEL Codes: F18; Q28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| trade liberalization (F13) | increase in environmental pollution (Q53) |
| relocation to countries with less stringent regulations (F29) | increase in environmental pollution (Q53) |
| higher trade costs (F12) | reduced delocalization (H77) |
| regulatory gap (L88) | trade flows in polluting products (F64) |
| local economic conditions (R11) | pollution levels (Q53) |
| regulatory enforcement (G18) | pollution levels (Q53) |
| transportation costs (L91) | trade flows in polluting products (F64) |
| market conditions (P42) | trade flows in polluting products (F64) |