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Can Rich Countries Become Pollution Havens? *
Author(s) -
Umanskaya Victoria I.,
Barbier Edward B.
Publication year - 2008
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/j.1467-9396.2008.00768.x
Subject(s) - economics , factor endowment , pollution , endowment , international economics , environmental policy , international trade , environmental regulation , natural resource economics , comparative advantage , political science , law , biology , ecology
This paper bridges the gap between two‐country Ricardian trade models where differences in environmental policies create pollution havens in a poorer region with weaker pollution regulations, and 2 × 2 Heckscher–Ohlin models that predict under certain conditions that pollution havens may occur in a richer region with tighter regulations. By relaxing the Heckscher–Ohlin assumptions of factor price equalization and no specialization, we show how creation of pollution havens in either region is possible, due to the interplay of policy and factor‐endowment motives. We also analyze the conditions for creating pollution havens in the cases of exogenous and endogenous environmental policy.