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Sources of comparative advantage in polluting industries (with appendix)
Broner, Fernando; Bustos, Paula; Carvalho, Vasco
Universitat Pompeu Fabra. Departament d'Economia i Empresa
We study the determinants of comparative advantage in polluting industries. We combine dataon environmental policy at the country level with data on pollution intensity at the industry levelto 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 aninstrument for environmental regulation based on meteorological determinants of pollution dispersion identified by the atmospheric pollution literature. We find that the effect of environmentalregulation on the pattern of trade is causal and comparable in magnitude to the effect of physicaland human capital.
Macroeconomics and International Economics
international trade
environmental regulation
comparative advantage
air pollution.
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