Revise and Resubmit, Economic Inquiry
Abstract: I quantify how comparative advantage and the pollution haven effect (PHE) shape international waste flows and infer the associated externality costs by constructing a Ricardian model with generation, trade, and use as a production input of waste. Combining waste flow, tariff, and environmental regulation data with a meteorological pollution dispersion instrument, I estimate that a 1% increase in trade costs reduces various waste flows by 7–29.3%. Stricter environmental regulation in origin relative to the destination lowers trade costs for certain waste by 7-77.7%. Per-unit externality costs increase but gains from waste trade decrease with income, with PHE contributing substantially.
Abstract: The Basel Convention for the trade of hazardous waste regulates the waste trade between members and also imposes stringent restrictions on the trade between members and non-members. We investigate the importance of these exclusionary trade restrictions in impacting bilateral trade flows and their spatial redistribution across Basel members and non-members. We find that accession to the treaty indeed reduces waste trade between the acceding country and non-members to a much greater extent than it impacts trade between that country and other members. As a result, the Convention's trade club feature provides incentives to join the Convention once membership becomes sufficiently high. The trade club feature also serves as an important accelerator of the Basel Convention's impact on global waste trade: the total impact on global waste flows when membership reaches 50 percent in the mid 1990's is almost as high as when membership becomes nearly complete at the end of the 2010's. This is because when membership is 50 percent, the number of trade pairs that are subject to the large member to non-member trade frictions is maximal. Finally, we find substantial heterogeneity in effects of the Basel Convention and of its trade club feature for OECD and non-OECD countries. Our findings have implications for the efficacy of trade clubs in mitigating environmental externalities and in counteracting free-rider effects in the formation of international environmental agreements.
Presentations (§ scheduled, † by co-author): AERE Summer Conference 2025, Midwest International Economics Group Spring Meeting 2024, Indian Statistical Institute Delhi 2024, Western Illinois University 2023, Heartland Workshop on Environmental and Resource Economics at Illinois 2023†, University of Vermont 2023†, The Political Economics of Environmental Sustainability Conference, Stanford University, 2023, Canadian Resource and Environmental Economics Association Annual Conference 2023, CRETE 2023†, Conference on Auctions, Competition, Regulation, and Public Policy, Lancaster University, 2023†, AERE@SEA 2022†
