Pollution Haven Hypothesis, Porter hypothesis, European Union, Trade Flows

Paper presented at the Conference “New economic concepts in the current European crises“.

Abstract: The aim of this paper is to investigate the relationship between environmental stringency and intra-EU trade flows. Two main hypotheses are tested. First, we test whether the stringency of a country’s environmental regulations may result in pollution havens. Second, we test whether the results differ by industry and for old and new EU member countries. An augmented gravity model is estimated using panel data for 21 European countries during the period 1996- 2008 for the full sample and also separately for the CEECS and the old EU members. Our results show weak support for the pollution haven hypothesis for some dirty industries mainly for net exports from Western EU countries to the rest. Instead, support for the “Porter hypothesis” is found for trade in clean goods.