Working Paper: NBER ID: w9718
Authors: Josh Edington; Arik Levinson; Jenny Minier
Abstract: In numerous studies, economists have found little empirical evidence that environmental regulations affect trade flows. In this paper, we propose and test several common explanations for why the effect of environmental regulations on trade may be difficult to detect. We demonstrate that while most trade occurs among industrialized economies, environmental regulations have stronger effects on trade between industrialized and developing economies. We find that for most industries, pollution abatement costs are a small component of total costs, and are unrelated to trade flows. In addition, we show that those industries with the largest pollution abatement costs also happen to be the least geographically mobile, or footloose.' After accounting for these distinctions, we measure a significant effect of pollution abatement costs on imports from developing countries, and in pollution-intensive, footloose industries.
Keywords: environmental regulations; trade flows; pollution haven hypothesis
JEL Codes: F1; F14; F18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Environmental regulations (Q52) | trade flows (F10) |
| Environmental costs (Q52) | net imports from developing countries (O19) |
| Pollution abatement costs (Q52) | trade flows (F10) |
| Pollution abatement costs (Q52) | net import penetration (F10) |
| Environmental regulations (Q52) | trade with non-OECD countries (F19) |