Trade Agreements Create Pollution Havens

Interesting paper out of the Berkeley Global Economy Journal
Trade Agreements and the Environment: An Industry Level Study for NAFTA
Raymond MacDermott. Global Economy Journal Volume 6, Issue 3 2006 Article 3

We find strong evidence of both the pollution-haven hypothesis and the positive impact of the NAFTA on FDI.  In addition, we find the trade agreement exacerbates the pollution-haven effect.  That is, the incentive to invest in countries with weak environmental regulations is greater under a trade agreement such as the NAFTA.  Surprisingly, stronger evidence of this effect is found in lower polluting industries than in higher polluting industries.

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