Working Paper: NBER ID: w18337
Authors: Fernando Broner; Paula Bustos; Vasco M. Carvalho
Abstract: We study the determinants of comparative advantage in polluting industries. We combine data on environmental policy at the country level with data on pollution intensity at the industry level to show that countries with laxer environmental regulation have a comparative advantage in polluting industries. Further, we address the potential problem of reverse causality. We propose an instrument for environmental regulation based on meteorological determinants of pollution dispersion identi...ed by the atmospheric pollution literature. We find that the effect of environmental regulation on the pattern of trade is causal and comparable in magnitude to the effect of physical and human capital.
Keywords: Comparative Advantage; Environmental Regulation; Polluting Industries; Trade Policy
JEL Codes: F11; F18; Q53; Q56
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Environmental regulation (Q52) | Comparative advantage in polluting industries (F64) |
| Ventilation coefficient (Q51) | Environmental regulation (Q52) |
| Ventilation coefficient (Q51) | Comparative advantage in polluting industries (F64) |