October 24, 2011

Unravelling the Worldwide Pollution Haven Effect

by Jean-Marie Grether, Nicole A. Mathys and Jaime de Melo

- This paper tackles the "pollution haven" argument by estimating the pollution content of imports (PCI). The PCI is then decomposed into three components: (i) a "deep" component (i.e. traditional variables unrelated to the environmental debate); (ii) a factor endowment component and (iii) a "pollution haven" component reflecting the impact of differences in environmental policies. The estimation is carried out for 1987 for an extensive data set covering 10 pollutants, 48 countries and 79 ISIC 4-digit sectors. Decompositions based on cross-section econometric estimates suggest a significant pollution haven effect which increases the PCI of the North because of stricter environmental regulations in the North.

Jean-Marie Grether, Nicole A. Mathys and Jaime de Melo (2011). "Unravelling the Worldwide Pollution Haven Effect." FEEM Note di Lavoro No. 2011.075, Oct 2011.