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This article examines the impact of environmental stringency on the pattern of intra-industry trade (IIT) flows of four pollution-intensive industries, that is, pulp and waste paper, lime, cement, and construction materials, iron ore and concentrates, and dyeing and tanning extracts, by utilizing a balanced panel dataset comprising of 36 countries over the period 1990 to 2019. The environmental stringency variable has been estimated from the energy intensity of the trading countries. The results show that the environmental stringency coefficients are highly statistically significant, implying that environmental regulation emerges as an essential indicator of the IIT flows between two trading countries.

Environmental Regulation and Intra-Industry Trade: An Empirical Analysis