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Environmental Policy and Industrial Competitiveness: The Pollution‐Haven Hypothesis Reconsidered
Author(s) -
Bommer Rolf
Publication year - 1999
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.00168
Subject(s) - relocation , haven , pollution haven hypothesis , economics , safe haven , liberalization , control (management) , pollution , international economics , international trade , business , public economics , market economy , environmental regulation , ecology , mathematics , management , combinatorics , computer science , biology , programming language
The pollution‐haven hypothesis suggests that strict environmental standards reduce domestic producers’ competitiveness and result in relocation to countries with more lenient standards. This paper examines the question of whether relocation is always caused by reduced competitiveness at home. By using a signaling approach, it is shown that relocation can be undertaken for purely strategic reasons. Relocation is the producer’s tool of indirect rent‐seeking to convince the policymaker to refrain from a further tightening of environmental control. It is also shown that trade liberalization increases the probability of strategic relocation.