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Environmental regulation and revealed comparative advantages in Europe: is China a pollution haven?

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  • Daniela Marconi

    (Bank of Italy)

Abstract

The relocation of more polluting industries in poorer countries due to gaps in environmental standards is known as the pollution haven effect, whereby the scale and the composition of output change across countries. Changes in the composition of the output mix might translate into changes of comparative advantages across countries, as revealed by trade flows. This paper focus on this issue and looks at the changes of bilateral revealed comparative advantages (RCAs) in the last decade between China and the major fourteen EU countries (EU14). Using industry level data on bilateral trade, air pollution, water pollution and several measures of environmental stringency, we find that, controlling for other factors that may have affected RCAs, such as labor costs, on average our EU14 countries have kept or improved their advantages with respect to China in both water polluting industries (such as paper and agro-based industries) and air polluting industries (such as basic metals and chemicals), while they have lost competitiveness in the more clean industries (such as machinery and fabricated metals).

Suggested Citation

  • Daniela Marconi, 2010. "Environmental regulation and revealed comparative advantages in Europe: is China a pollution haven?," Questioni di Economia e Finanza (Occasional Papers) 67, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_67_10
    as

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    References listed on IDEAS

    as
    1. Brian R. Copeland & M. Scott Taylor, 2004. "Trade, Growth, and the Environment," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 7-71, March.
    2. Jean-Marie Grether & Jaime de Melo, 2004. "Globalization and Dirty Industries: Do Pollution Havens Matter?," NBER Chapters, in: Challenges to Globalization: Analyzing the Economics, pages 167-203, National Bureau of Economic Research, Inc.
    3. Carl Pasurka, 2008. "Perspectives on Pollution Abatement and Competitiveness: Theory, Data, and Analyses," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 2(2), pages 194-218, Summer.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    revealed comparative advantages; environmental regulation; industrial pollution;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F18 - International Economics - - Trade - - - Trade and Environment

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