Environmental Lobbying on International Trade in Waste: Theory and Evidence

This paper investigates the effects of environmental lobbying on international trade in waste. I develop a theoretical framework that emphasizes the potential impact of green lobbies on environmental and trade policies and how North-to-South waste flows are affected through these policy channels. I show that the politically chosen policies are ambiguous relative to the socially optimal levels, depending on the heterogeneity of environmental preferences and the degree of pollution damages from waste. This in turn leads to ambiguous effects of environmental lobbying on the North-to-South waste trade. Further, I take the theory to the empirics using panel data on the bilateral waste trade and the number of environmental NGOs (ENGOs) as a proxy for the environmental lobbying strength. I employ two different empirical strategies. The first one is a gravity specification that exploits within-country and crosscountry variations. The results show that a 10% increase in the number of ENGOs in the North will lower North-to-South waste exports by 3.52%, whereas a similar increase in the South can reduce waste exports by 8.74%. The second approach uses a triple-difference estimation strategy that exploits plausibly exogenous variation created by waste exports restriction following the introduction of the EU Waste Shipment Regulation in 2006. I find that countries with 10% more ENGOs tend to decrease their waste exports by 6.7% more after the implementation of the regulation. These findings thus suggest that strengthening ENGOs can represent an important strategy to reduce the international waste trade.