Abstract
Abstract We empirically investigate the responsiveness of international trade to the stringency of environmental regulation. Stringent environmental regulation may impair the export competitiveness of dirty domestic industries, and as a result, pollution havens emerge in countries where environmental regulation is relatively less stringent. We examine the impact of pollution abatement and control costs on net exports in order to grasp this phenomenon. Theoretically, our analysis is related to a general equilibrium model of trade and pollution nesting the pollution haven motive for trade with the factor endowment motive. We analyze data on two-digit ISIC manufacturing industries during the period 19771992 in Germany, the Netherlands and the US, and show that trade patterns in dirty commodities are jointly determined by relative factor endowments and environmental stringency differentials.
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