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North-South Trade and Industry-Specific Pollutants

Discussion Papers


September 2005


In this paper, we examine the Pollution Haven Hypothesis (PHH) for the case inwhich every industry emits an industry-specific pollutant. When pollution intensities for individual pollutants are measured in terms of elasticity, there appears a clear trade pattern of the PHH. Developing countries export pollution-intensive goods while developed countries export less pollution-intensive goods. However, pollutants that are harmful to consumers may increase in either country as a result of trade liberalization. This suggests that in empirical studies, simple inclusion of harmfulness of pollutants in construction of a pollution intensity measure may mislead the result. We also find that consumers in different countries may exhibit different rankings of detestable pollutants, even though they have identical utility functions. Thus when international policy recommendations are made regarding how to set priorities among pollutants to be regulated, the experience of one country may not simply be applied to other countries.

Keywords: Environment, Pollution Haven Hypothesis, Industry-specific pollutant, North-South trade, Incomplete specialization
JEL classification: F18, O13, Q56

Abstract (Published version in Journal of Environmental Economics and Management)

Please note that discussion papers are works in various stages of progress and most have not been edited and proofread and may contain errors of fact or judgment. Revised versions of these papers may subsequently appear in more formal publication series. The views expressed in this publication are those of the author(s). The IDE does not guarantee the accuracy of the data included and accepts no responsibility for any consequences arising from its use.