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.
Adapting to Foreign Standards: Technical Barriers to Trade and the Geography of US Emissions (with Sergio Rocha)
Technical Barriers to Trade (TBTs) create opposing environmental effects by requiring cleaner production, while the associated adaptation can raise emissions. We combine data on TBT adoption by US' export destinations, bilateral US exports, and local industrial composition in a shift-share design to estimate the effect of exposure to foreign TBTs on regional pollution emissions in the US. We estimate that a 1 standard deviation (s.d.) increase in TBT treatment leads to 0.14, 0.05, and 0.13 s.d. increases in SO2, PM10, and VOC emissions growth, respectively. These effects are stronger when the foreign TBTs are unharmonized with US standards, mandate considerable production adjustments, and are subject to observable compliance. Unlike TBTs, exposure to foreign tariffs reduces local emissions growth by directly restricting trade flows. Our findings highlight the environmental consequences of non-traditional trade policy instruments for policymakers seeking to balance openness, standardization, and sustainability.
