Séminaire GREDEG - Fabien Candau (Université de Pau)

"Pollution Haven and Corruption Paradise"

12-11-2015 Salle Picasso
Publication : 12-11-2015
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Fabien Candau

(Université de Pau)


Jeudi 12 novembre 2015


Résumé : In this paper we analyse theoretically and empirically the impact of institutions, environmental standards and trade costs on the location choice of polluting firms in countries with lax environmental regulations (called pollution havens). We ask the following questions: Does a better market access between countries with heterogeneous institutions makes these pollution havens more attractive? Is that bad governance is only a cost, making pollution havens unattractive? The short answers are: yes and no. We find that pollution havens attract activities when 1) bilateral trade costs are low between countries which present a gap in environmental standards, 2) corruption allows reducing the stringency of environmental regulations. We find evidence of these results by exploiting a unique database on the number (and turnover) of European affiliates located abroad (the outward Foreign Aliates Statistics, FATS). Some simulations are performed based on our estimations. They show that an harmonization of environmental norms in Europe could reduce intra-European relocation towards pollution havens by 13%. Also, the protection of the European market access (e.g. carbon tax) to stop the PHH has to be high (a decrease of the European market access for Morocco and Tunisia equivalent to 15% ) not to say prohibitive (37% for China).


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