Do Environmental Regulations Influence the Competitiveness of Pollution-Intensive Products?

Abstract

According to “Pollution Haven Effect”, in order to circumvent stringent environment standards, polluting industries in developed countries will be chosen to locate into developing countries; another way is that developed countries increase imports of pollution-intensive products instead of producing by their own, both of which can contribute to the changes of comparative advantages in the past 30 years. Since 1990s, many scholars have paid special attention on whether environmental regulations affect the trade patterns or not, but the conclusions are ambiguous. This paper, based on the Heckscher-Ohlin-Vanek (HOV) model and using 95 and 42 countries sample data in year of 2005, is an empirical analysis which shows that: (1) according to the estimated results based on the “environmental governance” index calculated by CIESIN, environmental regulations do not change the comparative advantages of five types of pollutionintensive goods; (2) On the other hand, when the per capita income is considered as an endogenous indicator of environmental regulation, environmental regulation will significantly promote the comparative advantages in chemical products, iron and steel products and paper products, though environmental regulations do not take any influence on non-metallic minerals products and non-ferrous metals products. I think that appropriate level of environmental regulation can promote a comparative advantage in pollution-intensive goods.

Keywords

environmental regulation / pollution-intensive product / comparative advantage / trade pattern