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Do countries with higher institutional quality transition to cleaner trade?

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  • Peiró-Palomino, Jesús
  • Rodríguez-Crespo, Ernesto
  • Suárez-Varela, Marta

Abstract

There is growing concern about the shift of trade in more polluting products to countries with less restrictive environmental standards, popularly known as pollution havens. This paper explores whether institutional quality affects trade composition and fosters a transition towards cleaner products. Applying a gravity model to a sample of 140 countries for the period 2002–2018, our results show a negative link between institutional quality and trade in products classified as dirty. In addition, the results show a non-linear pattern, with the effects being stronger for countries with high levels of institutional quality. We also examine which dimensions of institutional quality play a more prominent role. Finally, we find that part of the effect of institutional quality is channelled through higher environmental stringency.

Suggested Citation

  • Peiró-Palomino, Jesús & Rodríguez-Crespo, Ernesto & Suárez-Varela, Marta, 2022. "Do countries with higher institutional quality transition to cleaner trade?," Ecological Economics, Elsevier, vol. 201(C).
    • Handle: RePEc:eee:ecolec:v:201:y:2022:i:c:s0921800922002166
    DOI: 10.1016/j.ecolecon.2022.107554
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    More about this item

    Keywords

    Dirty trade; Institutional quality; Pollution haven;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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