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Environmental Regulation and Revealed Comparative Advantages in Europe: Is China a Pollution Haven?
Author(s) -
Marconi Daniela
Publication year - 2012
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.1467-9396.2012.01042.x
Subject(s) - haven , comparative advantage , pollution haven hypothesis , relocation , china , economics , bilateral trade , pollution , international trade , international economics , environmental pollution , natural resource economics , environmental regulation , environmental science , environmental protection , geography , ecology , mathematics , archaeology , combinatorics , computer science , biology , programming language
The relocation of more polluting industries in poorer countries owing to gaps in environmental standards is known as the pollution haven effect , whereby the scale and the composition of output change across countries. Changes in the composition of the output mix might translate into changes of comparative advantages across countries, as revealed by trade flows. This paper focuses on this issue, looking at the changes in the structure of bilateral trade over the period 1996–2006 between China and 14 EU countries (EU14) as a measure of revealed comparative advantage (RCA). Using industry‐level data on bilateral trade, air‐ and water‐pollution intensity, and several measures of environmental stringency, we find that, after controlling for other factors (such as labor costs) on average our EU14 countries have kept or improved their RCA with respect to China in both water‐polluting industries (such as paper and agro‐based) and air‐polluting industries (such as basic metals and chemicals), while they have lost competitiveness in the more clean industries (such as machinery and fabricated metals). Thus, we find no evidence of a pollution haven effect on the bilateral trade pattern between Europe and China.