The pollution haven hypothesis (PHH) posits that production within polluting industries will shift to locations with lax environmental regulation. While straightforward, the existing empirical literature is inconclusive owing to two shortcomings. First, unobserved heterogeneity and measurement error are typically ignored due to the lack of a credible, traditional instrumental variable for regulation. Second, geographic spillovers have not been adequately incorporated into tests of the PHH. We overcome these issues utilizing two novel identification strategies within a model incorporating spillovers. Using US state-level data, own environmental regulation negatively impacts inbound foreign direct investment. Moreover, endogeneity is both statistically and economically relevant. SUMMARYThe pollution haven hypothesis (PHH) posits that production within polluting industries will shift to locations with lax environmental regulation. While straightforward, the existing empirical literature is inconclusive owing to two shortcomings. First, unobserved heterogeneity and measurement error are typically ignored due to the lack of a credible, traditional instrumental variable for regulation. Second, geographic spillovers have not been adequately incorporated into tests of the PHH. We overcome these issues utilizing two novel identification strategies within a model incorporating spillovers. Using US state-level data, own environmental regulation negatively impacts inbound foreign direct investment. Moreover, endogeneity is both statistically and economically relevant.

While exporting firms and non-exporters have been compared across several dimensions, empirical comparisons on the basis of environmental performance are relatively few. Moreover, analyzing the environmental implica-tions of firmlevel exports is not trivial due to non-random selection into exporting. In this light, we examine the impact of exporting on firms' energy efficiency by resorting to an instrumental variables strategy based on a differencing approach (Pitt and Rosenzweig, 1990). Utilizing data from Indonesia, we find (i) exporting to reduce the use of fuels (relative to electricity) and (ii) concerns over endogeneity of exporting status to be relevant. While exporting firms and non-exporters have been compared across several dimensions, empirical comparisons on the basis of environmental performance are relatively few. Moreover, analyzing the environmental implications of firm-level exports is not trivial due to non-random selection into exporting. In this light, we examine the impact of exporting on firms' energy efficiency by resorting to an instrumental variables strategy based on a differencing approach (Pitt and Rosenzweig, 1990). Utilizing data from Indonesia, we find (i) exporting to reduce the use of fuels (relative to electricity) and (ii) concerns over endogeneity of exporting status to be relevant. Roy, J. and M. Yasar (2015

This paper provides the first empirical analysis directly comparing the effects of customs unions (CUs) and free-trade agreements (FTAs) on members' bilateral trade, while addressing the biases arising from log-linearization of the gravity model and crucial time-invariant unobservables. Since Fiorentino et al. (2007 ) question the popularity of CUs relative to FTAs, considering the latter to be more practical in the current trading climate, such a comparison seems especially relevant. While Baier and Bergstrand (2007 ) find an FTA to approximately double members' bilateral trade after 10 years, the results of this paper find CUs to have had a much larger impact than FTAs. Copyright � 2010 Blackwell Publishing Ltd.

In the trade and environment debate, the relevance of intra-industry trade (IIT) cannot be overemphasized. However, an empirical analysis of the environmental implications of such trade is long overdue. Although a number of studies have largely found overall trade to be pro-environment, the consequences of IIT may di §er due to lower adjustment costs, easier technology absorption, and a distinct composition e §ect. In this light, we provide the first empirical investigation of IIT's impact on the environment. Apart from utilizing data on eight environmental indicators from roughly 200 countries over 2000-2005, we also attend to concerns over endogeneity by instrumenting for our trade and income variables. Across several sets of instruments, we consistently find (i) IIT to typically benefit the environment, (ii) overall trade to be less pro-environment than IIT, and (iii) concerns over endogeneity to be relevant.

The WTO's impact on bilateral trade remains puzzling due, in part, to previous studies' failure to simultaneously address three issues: inclusion of zero trade, proper controls for multilateral resistance, and proper membership definition. Addressing all fails to suggest a positive effect.