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Trade Liberalization and Pollution Intensive Industry in Developing Countries: A Partial Equilibrium Approach

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  • Gallagher, Kevin P.
  • Ackerman, Frank

Abstract

Economic theory suggests that liberalization of trade between countries with differing levels of environmental protection could lead pollution-intensive industry to concentrate in the nations where regulations are lax. This effect, often referred to as the "pollution haven" hypothesis, is much discussed in theory, but finds only ambiguous support in empirical research to date. Methodologies used for research on trade and environment differ widely; many are difficult to apply to practical policy questions. We develop a simple, partial equilibrium model explicitly designed to analyze the effects of a change in trade policy. Our model analyzes the relative concentrations of "clean" and "dirty" industries in two nations or regions, before and after the policy change. While lacking the theoretical rigor and mathematical intricacy of other modeling methods, our approach has the advantages of transparency and accessibility to a broad range of analysts and policy makers.

Suggested Citation

  • Gallagher, Kevin P. & Ackerman, Frank, 2000. "Trade Liberalization and Pollution Intensive Industry in Developing Countries: A Partial Equilibrium Approach," Working Papers 15592, Tufts University, Global Development and Environment Institute.
    • Handle: RePEc:ags:tugdwp:15592
    DOI: 10.22004/ag.econ.15592
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    References listed on IDEAS

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    1. Timothy J. Bartik, 2010. "Small Business Start-Ups in the United States: Estimates of the Effects of Characteristics of States," Book chapters authored by Upjohn Institute researchers, in: Zolton Acs (ed.),Entrepreneurship and regional Development, pages 155-169, W.E. Upjohn Institute for Employment Research.
    2. Frank Ackerman & Kevin Gallagher, "undated". "Getting the Prices Wrong: The Limits of Market-Based Environmental Policy," GDAE Working Papers 00-05, GDAE, Tufts University.
    3. Dean, Judith M., 1992. "Trade and the environment : a survey of the literature," Policy Research Working Paper Series 966, The World Bank.
    4. Frank Ackerman, 2001. "Still dead after all these years: interpreting the failure of general equilibrium theory," Journal of Economic Methodology, Taylor & Francis Journals, vol. 9(2), pages 119-139.
    5. Adam B. Jaffe et al., 1995. "Environmental Regulation and the Competitiveness of U.S. Manufacturing: What Does the Evidence Tell Us?," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 132-163, March.
    6. Levinson, Arik, 1996. "Environmental regulations and manufacturers' location choices: Evidence from the Census of Manufactures," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 5-29, October.
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    Cited by:

    1. Paul Lanoie & Jérémy Laurent‐Lucchetti & Nick Johnstone & Stefan Ambec, 2011. "Environmental Policy, Innovation and Performance: New Insights on the Porter Hypothesis," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(3), pages 803-842, September.
    2. Indriya, Soca & Widodo, Tri, 2011. "Do Pollution Havens Exist? Evidence from East Asia," MPRA Paper 79924, University Library of Munich, Germany.
    3. Malini L. Tantri & Varadurga Bhat, 2023. "Trap of Race to the Bottom? Evidence from Pollution Intensive Products Trade in India and China," China Report, , vol. 59(2), pages 154-171, May.
    4. Frank Ackerman & Kevin Gallagher, "undated". "Getting the Prices Wrong: The Limits of Market-Based Environmental Policy," GDAE Working Papers 00-05, GDAE, Tufts University.
    5. Frank Ackerman, 2001. "Still dead after all these years: interpreting the failure of general equilibrium theory," Journal of Economic Methodology, Taylor & Francis Journals, vol. 9(2), pages 119-139.
    6. Grant Ferrier, 2010. "The evolution of the environmental industry in the post-NAFTA era in Mexico," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 10(2), pages 147-164, June.
    7. Kakali Mukhopadhyay & Debesh Chakraborty, 2005. "Is liberalization of trade good for the environment? Evidence from India," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 12(1), pages 109-136, June.
    8. Kevin P. Gallagher & Frank Ackerman & Luke Ney, "undated". "Economic Analysis in Environmental Reviews of Trade Agreements: Assessing the North American Experience," GDAE Working Papers 02-01, GDAE, Tufts University.
    9. Frank Ackerman & Sumreen Mirza, "undated". "Waste in the Inner City: Asset or Assault?," GDAE Working Papers 00-08, GDAE, Tufts University.
    10. Dellachiesa, Alejandro E. & Myint, Aung P., 2016. "Trade openness and the changing water polluting intensity patterns of ‘dirty’ and ‘clean’ industrial sectors," Ecological Economics, Elsevier, vol. 129(C), pages 143-151.

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