de santis, roberta (2011): Impact of environmental regulations on trade in the main EU countries: conflict or synergy? Published in: LLEE working paper series No. n.93 (April 2011): pp. 1-24.
Download (411Kb) | Preview
In an increasingly integrated world with declining trade barriers, environmental regulations can have a decisive role in shaping countries’ comparative advantages. The conventional wisdom about environmental protection is that it comes at an additional cost on firms imposed by the government, which may erode their global competitiveness. However, this paradigm has been challenged by some analysts. In particular, Porter (1991) and Porter and Van der Linde (1995) argue that pollution is often associated with a waste of resources and that more stringent environmental policies can stimulate innovations that may over-compensate for the costs of complying with these policies. This is known as the Porter hypothesis. While there is a broad empirical literature on the impact of trade on environment the empirical literature on the impact of environmental regulations on trade flows is relatively scarce, very heterogeneous and presents mixed results. The innovative feature of this paper is its attempts to estimate, in a gravity setting, augmented with a proxi of environmental stringency, the impact of three major Multilateral Environmental Agreements (MEAs) on 15 EU countries bilateral exports. According to our estimates, in the period 1988-2008, to be member of MEAs had a positive average impact on EU15 bilateral exports. This evidence can be partly explained by a possible trade diversion effect with respect to countries that did not sign MEAs, and a corresponding trade creation effect among members of the environmental agreements. Furthermore, evidence coming from interaction effects estimates seems to show that for exporting countries having signed the UNFCCC and the Montreal agreements, partly mitigates (by the amount of the estimated coefficient ) the negative impact of having a relatively more stringent environmental regulation on bilateral trade. This result could have important policy implications for the future international trade- environmental negotiations.
|Item Type:||MPRA Paper|
|Original Title:||Impact of environmental regulations on trade in the main EU countries: conflict or synergy?|
|Keywords:||Comparative advantage, environmental regulation, trade|
|Subjects:||F - International Economics > F1 - Trade > F18 - Trade and Environment|
|Depositing User:||roberta de santis|
|Date Deposited:||30. Mar 2012 13:34|
|Last Modified:||15. Feb 2013 11:19|
Ambec S., Barla P. (2006) Can environmental regulations be good for business? An assessment of the Porter hypothesis. Energy Studies Review, Vol. 14, No. 2, pp.42-62.
Ambec, Stefan & Cohen, Mark A. & Elgie, Stewart & Lanoie, Paul, 2011. "The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness?," Discussion Papers dp-11-01, Resources For the Future
Anderson J.E. and E. Van Wincoop (2003) “Gravity with Gravitas: a Solution to the Border Puzzle)”, American Economic Review, 93, 1, pp.170-192.
Antweiler, Werner; Brian R. Copeland and M. Scott Taylor. 2001. “Is Free Trade Good for the Environment?” Amer. Econ. Rev. 91:4, pp. 877–908.
Bjørn, E., R. Golombek and A. Raknerud, 1997. Environmental regulation and plant exit: a logit analysis based on establishment panel data. Environmental and Resource Economics 11: 35-59.
Cagatay, S. & Mihci, H. (2006). “Degree of environmental stringency and the impact on trade patterns”, Journal of Economic Studies, Vol. 33 No. 1, 2006, pp. 30-51
Cole, M.A. and Elliott, R.J.R. (2003), Do Environmental Regulations Influence Trade Patterns? Testing Old and New Trade Theories. The World Economy, Vol. 26, 8, pp. 1163-86
Deardoff A.V. (1998), “Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?” in Jeffrey A. Frankel (ED) The Regionalisation of the World Economy, Chicago, University of Chicago Press for NBER, pp.7-22.
De Benedictis L., De Santis R: and Vicarelli C: (2005), “Hub and Spoke or Else? Free Trade Agreements in the “Enlarged” EU”, in European Journal of Comparative Economics, vol.2, issue.2 .
De Santis R. Vicarelli C. (2007) “The “Deeper” and the “Wider” EU Strategies of Trade Integration. An Empirical Evaluation of Common Commercial Policy Effects”, Global Economy Journal, vol.7, issue 4, ,art.4, 2007
De Santis R., De Nardis S. and Vicarelli C. (2008a) “The single currency’s effects on Eurozone sectoral trade: winners and losers?”, Economics ejournal Kiel, vol.2, n.17
De Santis R., De Nardis S. and Vicarelli C. (2008b) “The Euro’s Effects on Trade in a Dynamic Setting”, European Journal of Comparative Economics, vol5, n.1
Egger P. (2005), Estimating Regional Trading Bloc Effects with Panel Data’ Weltwirtschaftliches Archiv/Review of World Economics, 140, 151-156.
Egger P. and M. Pfaffermayr (2002), ‘The pure effects of European Integration on intra-EU core and Periphery trade’, University of Innsbruck Working Paper No. 1.
Egger, P. and M. Pfaffermayr (2004). Distance, Trade and FDI: A Hausman-Taylor SUR Approach. Journal of Applied Econometrics, Vol. 19, pp. 227-246.
Evenett S.J. and W. Keller (2002), “On Theories Explaining the Success of Gravity Models”, Journal of Political Economy, vol.110, pp.281-316.
Feenstra, R. (2004). Advanced International Trade: Theory and Evidence. Oxford: Princeton University Press
Fredriksson, P.G. (ed.), 1999. Trade, Global Policy, and the Environment. World Bank Discussion Paper, No. 402, The World Bank, Washington D.C.
Grether, J.-M. and J. de Melo, (2004), "Globalisation and dirty industries: Do pollution havens matter?" in R.E. Baldwin and A. Winters eds., Challenges to Globalisation: Analyzing the Economics, University of Chicago Press, 167-208.
Harris, M. N., L. Kónya and L. Mátyás (2002), ‘Modelling the Impact of Environmental Regulations on Bilateral Trade Flows: OECD, 1990–1996’, The World Economy, 25, 3, 387–405.
Helpman, E. and P. Krugman, 1986, Market Structure and Foreign Trade, MIT Press, Cambridge, Massachusetts
Jaffe, A.B., S.R. Peterson, R.R. Portney and R. Stavins, 1995. Environmental regulation and the competitiveness of US manufacturing. Journal of Economic Literature 33: 132-163.
Jug J. and Mirza D., (2005), Environmental Regulations in Gravity Equations: Evidence from Europe. The World Economy, Vol. 28, No. 11, pp. 1591-1615, November .
Levinson A, 2009. "Pollution and International Trade in Services," NBER Working Papers 14936, National Bureau of Economic Research, Inc
Linnemann, H., 1966. An Econometric Study of International Trade Flows. Amsterdam: North- Holland.
Low, P. and A. Yeats, 1992. Do “dirty” industries migrate? In: P. Low (ed.), International Trade and the Environment, Washington D.C., World Bank Discussion Papers, 159, 89-103.
Marques H, and J. Spies (2006). "Trade Effects of the Europe Agreements," Discussion Paper 274/2006, Department of Economics, University of Hohenheim, Germany.
Markusen, J.R., 1999. Location choice, environmental quality and public policy. In: J.C.J.M. van den Bergh (ed.), Handbook of Environmental and Resource Economics. Cheltenham: Edward Elgar.
Melitz J. (2005), North, South and Distance in the Gravity Model, CEPR Discussion Paper N. 5136.
Porter M. C. (1991). “America’s Green Strategy.” Scientific American 264 (4): 168.
Porter, M.E. and C. van der Linde, 1995. Green and competitive: ending the stalemate, Harvard Business Review, September-October: 120-134.
Tinbergen, J., 1962. Shaping the World Economy. Suggestions for an International Economic Policy, New York: The Twentieth Century Fund.
Rose A.K. (2002), Do we really know that the WTO increases trade?, NBER Working Paper n. 9273, October.
Steininger, K.W., 1999 General models of environmental policy and foreign trade. In: J.C.J.M. van den Bergh (ed.), Handbook of Environmental and Resource Economics.
Subramanian A. and S. Wei (2003), The WTO Promotes Trade but Unevenly, NBER Working Paper n. 10024, October.
Tobey, J. A., (1990) The effects of domestic environmental policies on patterns of world trade: an empirical test, Kyklos 43: 191-209.
Tobey, J. A., (1993) The impact of domestic environmental policy on international trade. In: H. Giersch (ed.), Economic Progress and Environmental Concerns, Berlin: Springer-Verlag.
Ulph, A. (1999) Strategic environmental policy and foreign trade. In: J.C.J.M. van den Bergh (ed.), Handbook of Environmental and Resource Economics. Cheltenham: Edward Elgar.
UNCTAD, (1976). Implications for the Trade and Investment of Developing Countries of United States Environmental Controls, New York: United Nations.
Van Beers, C. and J.C.J.M. van den Bergh, (1997). An empirical multi-country analysis of the impact of environmental regulations on foreign trade flows. Kyklos 50: 29-46.
Xu, X., and L. Song, (2000) Regional cooperation and the environment: do “dirty” industries migrate? Weltwirtschaftliches Archiv 136(1): 137-157.