IDEAS home Printed from https://ideas.repec.org/p/ehl/lserod/42097.html
   My bibliography  Save this paper

Does the ‘California effect’ operate across borders? trading- and investing-up in automobile emission standards

Author

Listed:
  • Perkins, Richard
  • Neumayer, Eric

Abstract

The 'California effect' hypothesis posits that economic integration may lead to the ratcheting upwards of regulatory standards towards levels found in higher-regulating jurisdictions. Although a number of previous large sample quantitative studies have investigated such convergence dynamics for public environmental policies, their results have been based exclusively on geographically and sectorally aggregated data. Our contribution advances on these studies. We provide the first large-N, geographically disaggregated evidence consistent with a trading-up effect: exports of automobiles and related components from developing countries to countries with more stringent automobile emission standards are found to be associated with more stringent domestic emission standards. Investing-up dynamics are also apparent, with aggregate inward foreign direct investment into host developing economies' automotive sector increasing the likelihood of more stringent emission standards domestically.

Suggested Citation

  • Perkins, Richard & Neumayer, Eric, 2012. "Does the ‘California effect’ operate across borders? trading- and investing-up in automobile emission standards," LSE Research Online Documents on Economics 42097, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:42097
    as

    Download full text from publisher

    File URL: http://eprints.lse.ac.uk/42097/
    File Function: Open access version.
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hao, Jiming & Hu, Jingnan & Fu, Lixin, 2006. "Controlling vehicular emissions in Beijing during the last decade," Transportation Research Part A: Policy and Practice, Elsevier, vol. 40(8), pages 639-651, October.
    2. Anthony Heyes, 2009. "Is environmental regulation bad for competition? A survey," Journal of Regulatory Economics, Springer, vol. 36(1), pages 1-28, August.
    3. Aseem Prakash & Matthew Potoski, 2006. "Racing to the Bottom? Trade, Environmental Governance, and ISO 14001," American Journal of Political Science, John Wiley & Sons, vol. 50(2), pages 350-364, April.
    4. Susmita Dasgupta & Ashoka Mody & Subhendu Roy & David Wheeler, 2001. "Environmental Regulation and Development: A Cross-country Empirical Analysis," Oxford Development Studies, Taylor & Francis Journals, vol. 29(2), pages 173-187.
    5. Beise, Marian & Rennings, Klaus, 2005. "Lead markets and regulation: a framework for analyzing the international diffusion of environmental innovations," Ecological Economics, Elsevier, vol. 52(1), pages 5-17, January.
    6. Matthew A. Cole & Robert J. R. Elliott & Per G. Fredriksson, 2006. "Endogenous Pollution Havens: Does FDI Influence Environmental Regulations?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(1), pages 157-178, March.
    7. Dani Rodrik, 1998. "Has Globalization Gone Too Far?," Challenge, Taylor & Francis Journals, vol. 41(2), pages 81-94, March.
    8. Timilsina, Govinda R. & Dulal, Hari B., 2009. "Regulatory instruments to control environmental externalities from the transport sector," European Transport \ Trasporti Europei, ISTIEE, Institute for the Study of Transport within the European Economic Integration, issue 41, pages 80-112.
    9. Damania, Richard & Fredriksson, Per G. & List, John A., 2003. "Trade liberalization, corruption, and environmental policy formation: theory and evidence," Journal of Environmental Economics and Management, Elsevier, vol. 46(3), pages 490-512, November.
    10. Ivan Haščič & Frans de Vries & Nick Johnstone & Neelakshi Medhi, 2009. "Effects of environmental policy on the type of innovation: The case of automotive emission-control technologies," OECD Journal: Economic Studies, OECD Publishing, vol. 2009(1), pages 1-18.
    11. Timilsina, Govinda R. & Dulal, Hari B., 2009. "A review of regulatory instruments to control environmental externalities from the transport sector," Policy Research Working Paper Series 4867, The World Bank.
    12. Lall, Sanjaya, 1992. "Technological capabilities and industrialization," World Development, Elsevier, vol. 20(2), pages 165-186, February.
    13. Meenu Tewari & Poonam Pillai, 2005. "Global Standards and the Dynamics of Environmental Compliance in India's Leather Industry," Oxford Development Studies, Taylor & Francis Journals, vol. 33(2), pages 245-267.
    14. Wheeler, David, 2001. "Racing to the bottom : foreign investment and air pollution in developing countries," Policy Research Working Paper Series 2524, The World Bank.
    15. Martin Jänicke & Klaus Jacob, 2004. "Lead Markets for Environmental Innovations: A New Role for the Nation State," Global Environmental Politics, MIT Press, vol. 4(1), pages 29-46, February.
    16. Hilton, F.G., 2006. "Poverty and pollution abatement: Evidence from lead phase-out," Ecological Economics, Elsevier, vol. 56(1), pages 125-131, January.
    17. Hoberg, George, 1991. "Sleeping with an Elephant: The American Influence on Canadian Environmental Regulation," Journal of Public Policy, Cambridge University Press, vol. 11(1), pages 107-131, January.
    18. Eric Neumayer & Richard Perkins, 2004. "What Explains the Uneven Take-Up of ISO 14001 at the Global Level? A Panel-Data Analysis," Environment and Planning A, , vol. 36(5), pages 823-839, May.
    19. Kyla Tienhaara, 2006. "Mineral investment and the regulation of the environment in developing countries: lessons from Ghana," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 6(4), pages 371-394, December.
    20. Richard Perkins & Eric Neumayer, 2010. "Geographic Variations in the Early Diffusion of Corporate Voluntary Standards: Comparing ISO 14001 and the Global Compact," Environment and Planning A, , vol. 42(2), pages 347-365, February.
    21. Paulo Albuquerque & Bart J. Bronnenberg & Charles J. Corbett, 2007. "A Spatiotemporal Analysis of the Global Diffusion of ISO 9000 and ISO 14000 Certification," Management Science, INFORMS, vol. 53(3), pages 451-468, March.
    22. World Bank, 2009. "World Development Indicators 2009," World Bank Publications - Books, The World Bank Group, number 4367.
    23. Bernauer, Thomas & Caduff, Ladina, 2004. "In Whose Interest? Pressure Group Politics, Economic Competition and Environmental Regulation," Journal of Public Policy, Cambridge University Press, vol. 24(1), pages 99-126, May.
    24. David Bauner & Staffan Laestadius, 2003. "The Introduction of the Automotive Catalytic Converter in Chile," Journal of Transport Economics and Policy, University of Bath, vol. 37(2), pages 157-199, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mélanie Heugues, 2014. "International environmental cooperation: a new eye on the greenhouse gas emissions’ control," Annals of Operations Research, Springer, vol. 220(1), pages 239-262, September.
    2. Flannery, Wesley & O’Hagan, Anne Marie & O’Mahony, Cathal & Ritchie, Heather & Twomey, Sarah, 2015. "Evaluating conditions for transboundary Marine Spatial Planning: Challenges and opportunities on the island of Ireland," Marine Policy, Elsevier, vol. 51(C), pages 86-95.
    3. Chakraborty, Pavel & Chatterjee, Chirantan, 2017. "Does environmental regulation indirectly induce upstream innovation? New evidence from India," Research Policy, Elsevier, vol. 46(5), pages 939-955.
    4. Federica Genovese & Endre Tvinnereim, 2019. "Who opposes climate regulation? Business preferences for the European emission trading scheme," The Review of International Organizations, Springer, vol. 14(3), pages 511-542, September.
    5. Patrick Wagner & Damian Raess, 2023. "South to north investment linkages and decent work in Brazil," LABOUR, CEIS, vol. 37(1), pages 122-159, March.
    6. Dechezlepretre, Antoine & Perkins, Richard & Neumayer, Eric, 2012. "Regulatory Distance and the Transfer of New Environmentally Sound Technologies: Evidence from the Automobile Sector," Climate Change and Sustainable Development 128199, Fondazione Eni Enrico Mattei (FEEM).
    7. Franckx, Laurent, 2014. "Regulatory emission limits for mobile sources and the Porter hypothesis: a survey of the literature," MPRA Paper 56448, University Library of Munich, Germany.
    8. Daniel Witte, 2020. "Business for Climate: A Qualitative Comparative Analysis of Policy Support from Transnational Companies," Global Environmental Politics, MIT Press, vol. 20(4), pages 167-191, Autumn.
    9. David J. Gordon, 2015. "An Uneasy Equilibrium: The Coordination of Climate Governance in Federated Systems," Global Environmental Politics, MIT Press, vol. 15(2), pages 121-141, May.
    10. Mohamed Boly, 2018. "CO 2 mitigation in developing countries: the role of foreign aid," Working Papers halshs-01740881, HAL.
    11. Costantini, Valeria & Crespi, Francesco & Paglialunga, Elena & Sforna, Giorgia, 2020. "System transition and structural change processes in the energy efficiency of residential sector: Evidence from EU countries," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 309-329.
    12. Peter Egger & Doina Radulescu & Nora Strecker, 2017. "On the spread of social protection systems," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(4), pages 550-574, August.
    13. Peter Egger & Doina Radulescu & Nora Strecker, 2017. "On the spread of social protection systems," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(4), pages 550-574, August.
    14. Miller, Sebastián J. & Vela, Mauricio A., 2013. "Are Environmentally Related Taxes Effective?," IDB Publications (Working Papers) 4685, Inter-American Development Bank.
    15. Caroline Freund & Sarah Oliver, 2015. "Gains from Harmonizing US and EU Auto Regulations under the Transatlantic Trade and Investment Partnership," Policy Briefs PB15-10, Peterson Institute for International Economics.
    16. Dechezleprêtre, Antoine & Neumayer, Eric & Perkins, Richard, 2015. "Environmental regulation and the cross-border diffusion of new technology: Evidence from automobile patents," Research Policy, Elsevier, vol. 44(1), pages 244-257.
    17. Caroline Freund & Sarah Oliver, 2015. "Gains from Convergence in US and EU Auto Regulations under the Transatlantic Trade and Investment Partnership," RSCAS Working Papers 2015/59, European University Institute.
    18. Suchita Srinivasan, 2017. "Driven up the wall? Role of environmental regulation in innovation along the automotive global value chain," CIES Research Paper series 52-2017, Centre for International Environmental Studies, The Graduate Institute.
    19. Dolphin, G. & Pollitt, M., 2018. "International Spillovers and Carbon Pricing Policies," Cambridge Working Papers in Economics 1803, Faculty of Economics, University of Cambridge.
    20. Chakraborty, Pavel & Chakrabarti, Anindya S. & Chatterjee, Chirantan, 2023. "Cross-border environmental regulation and firm labor demand," Journal of Environmental Economics and Management, Elsevier, vol. 117(C).
    21. Jonas Gamso, 2018. "Trade-based adoption of voluntary environmental programs in the developing world: Racing to the top or stuck in the mud?," Policy Sciences, Springer;Society of Policy Sciences, vol. 51(4), pages 515-543, December.
    22. Dolphin, Geoffroy & Pollitt, Michael G., 2021. "The International Diffusion of Climate Policy: Theory and Evidence," RFF Working Paper Series 21-23, Resources for the Future.
    23. Consoli, Davide & Costantini, Valeria & Paglialunga, Elena, 2023. "We're in this together: Sustainable energy and economic competitiveness in the EU," Research Policy, Elsevier, vol. 52(1).
    24. Kolcava, Dennis & Nguyen, Quynh & Bernauer, Thomas, 2019. "Does trade liberalization lead to environmental burden shifting in the global economy?," Ecological Economics, Elsevier, vol. 163(C), pages 98-112.
    25. Abdoul G. Sam & Danbee Song, 2022. "Corporate environmentalism and international trade: Evidence from industry‐level data," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(5), pages 1440-1455, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. José-Antonio Monteiro & Madina Kukenova, 2008. "Does Lax Environmental Regulation Attract FDI When Accounting For "Third-Country" Effects?," IRENE Working Papers 08-01, IRENE Institute of Economic Research.
    2. Ben Kheder, Sonia & Zugravu, Natalia, 2012. "Environmental regulation and French firms location abroad: An economic geography model in an international comparative study," Ecological Economics, Elsevier, vol. 77(C), pages 48-61.
    3. Nicole A. MATHYS & Jaime DE MELO, 2010. "Trade and Climate Change: The Challenges Ahead," Working Papers P14, FERDI.
    4. Daniel Fiorino, 2011. "Explaining national environmental performance: approaches, evidence, and implications," Policy Sciences, Springer;Society of Policy Sciences, vol. 44(4), pages 367-389, November.
    5. Fernando Broner & Paula Bustos & Vasco Carvalho, 2011. "Sources of comparative advantage in polluting industries," Economics Working Papers 1331, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 2019.
    6. Dana C. Andersen, 2016. "Credit Constraints, Technology Upgrading, and the Environment," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(2), pages 283-319.
    7. Barbieri, Nicolò, 2015. "Investigating the impacts of technological position and European environmental regulation on green automotive patent activity," Ecological Economics, Elsevier, vol. 117(C), pages 140-152.
    8. Katrin Millock & Natalia Zugravu & Gérard Duchene, 2008. "The Factors Behind CO2 Emission Reduction in Transition Economies," Working Papers 2008.58, Fondazione Eni Enrico Mattei.
    9. 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).
    10. Ayse M. Erdogan, 2014. "Foreign Direct Investment And Environmental Regulations: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 28(5), pages 943-955, December.
    11. Natalia Zugravu-Soilita, 2017. "How does Foreign Direct Investment Affect Pollution? Toward a Better Understanding of the Direct and Conditional Effects," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(2), pages 293-338, February.
    12. del Río González, Pablo, 2009. "The empirical analysis of the determinants for environmental technological change: A research agenda," Ecological Economics, Elsevier, vol. 68(3), pages 861-878, January.
    13. Dong-Hyeon Kim & Shu-Chin Lin, 2022. "Trade Openness and Environmental Policy Stringency: Quantile Evidence," Sustainability, MDPI, vol. 14(6), pages 1-15, March.
    14. Yen Nguyen & Son Le & Nam Ngo & Huyen Nguyen, 2023. "Impacts of FDI and Environmental Pollution in ASEAN Countries: The Role of Institutions," International Journal of Energy Economics and Policy, Econjournals, vol. 13(5), pages 242-250, September.
    15. Céline Azémar & Rodolphe Desbordes, 2010. "Short‐run Strategies for Attracting Foreign Direct Investment," The World Economy, Wiley Blackwell, vol. 33(7), pages 928-957, July.
    16. Grether, Jean-Marie & Mathys, Nicole A., 2013. "The pollution terms of trade and its five components," Journal of Development Economics, Elsevier, vol. 100(1), pages 19-31.
    17. Jale Tosun & Christoph Knill, 2011. "The Differential Impact of Economic Integration on Environmental Policy," Chapters, in: Miroslav N. Jovanović (ed.), International Handbook on the Economics of Integration, Volume III, chapter 12, Edward Elgar Publishing.
    18. Francesco Nicolli & Francesco Vona & Lionel Nesta, 2012. "Determinants of Renewable Energy Innovation: Environmental Policies vs. Market Regulation," Working Papers 201204, University of Ferrara, Department of Economics.
    19. Nicolli, Francesco & Vona, Francesco, 2012. "The Evolution of Renewable Energy Policy in OECD Countries: Aggregate Indicators and Determinants," Climate Change and Sustainable Development 130897, Fondazione Eni Enrico Mattei (FEEM).
    20. Copeland, Brian R., 2005. "Policy Endogeneity and the Effects of Trade on the Environment," Agricultural and Resource Economics Review, Cambridge University Press, vol. 34(1), pages 1-15, April.

    More about this item

    Keywords

    automobiles; California effect; convergence; investing-up; standards; trading-up;
    All these keywords.

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:42097. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: LSERO Manager (email available below). General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.