Working Paper: CEPR ID: DP5815
Authors: Jean-Marie Grether; Nicole A. Mathys; Jaime De Melo
Abstract: This paper contributes to the debate on the existence of pollution haven effects by systematically measuring the pollution content of trade (measured by the polluction content of imports (PCI)) and decomposing it into three components: a `deep' (i.e. unrelated to the environmental debate) component and two components (factor endowments and environmental policies) that occupy centerstage in the debate on trade and the environment. The decomposition is carried out for 1986-88 for an extensive data set covering 10 pollutants, 48 countries and 79 ISIC 4-digit sectors. Illustrative decompositions presented for 3 of the 10 pollutants in the data set indicate a significant pollution haven effect and highlight the role of factor endowments in each region's PCI. However, because the bulk of trade is intra-regional with a high North-North share, these effects are small relative to the `deep' determinants of the worldwide pollution content of trade.
Keywords: pollution haven; trade; environment
JEL Codes: F18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tightening of environmental standards in developed countries (North) (F64) | Increase in the pollution content of imports from developing countries (South) (F64) |
| Differences in factor endowments (F16) | Comparative advantage of dirty industries (L99) |
| Factor endowment effect (FE) (F16) | Mitigation of overall impact on global pollution content of imports (PCI) (F64) |
| Pollution haven effect (PH) (F64) | Increase in pollution content of imports from developing countries (South) (F64) |
| Pollution haven effect (PH) (F64) | Shaping pollution content of imports (PCI) (F18) |