Department of Economics and Business - Universitat Pompeu Fabra

Title:: Sources of comparative advantage in polluting industries
Authors:: Fernando Broner, Paula Bustos and Vasco Carvalho
Date:: June 2011 (Revised: December 2019)
Abstract:: We study the determinants of comparative advantage in polluting industries. We combine data on environmental policy at the country level with data on pollution intensity at the industry level to show that countries with laxer environmental regulation have a comparative advantage in polluting industries. Further, we address the potential problem of reverse causality. We propose an instrument for environmental regulation based on meteorological determinants of pollution dispersion identied by the atmospheric pollution literature. We find that the effect of environmental regulation on the pattern of trade is causal and comparable in magnitude to the effect of physical and human capital.
Keywords:: International Trade, Environmental Regulation, Comparative Advantage, Air Pollution.
JEL codes:: F11, F18, Q53, Q56
Area of Research:: Macroeconomics and International Economics

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