Have Countries with Lax Environmental Regulations a Comparative Advantage in Polluting Industries?
Magazine article, 2007

We aim to study whether lax environmental regulations induce comparative advantages, causing the least-regulated countries to specialize in polluting industries. The study is based on Trefler and Zhu’s (2005) definition of the factor content of trade. For the econometrical analysis, we use a cross-section of 71 countries in 2000 to examine the net exports in the most polluting industries. We try to overcome three weaknesses in the empirical literature: the measurement of environmental endowments or environmental stringency, the possible endogeneity of the explanatory variables, and the influence of the industrial level of aggregation. As a result, we do find some evidence in favor of the pollution-haven effect. The exogeneity of the environmental endowments was rejected in several industries, and we also find that industrial aggregation matters.


pollution haven

Porter hypothesis

environmental regulation

comparative advantage


Miguel Quiroga

Martin Persson

Chalmers, Energy and Environment, Physical Resource Theory

Thomas Sterner

University of Gothenburg

RFF Discussion Paper Series

RFF DP 07-08 38-

Driving Forces

Sustainable development

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