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Institutions, comparative advantage and environment

9th National Competition for Economic Research Grants

International economics

Senior Researcher : Fernando A. Broner Pasik

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Research Centre or Institution : Centre de Recerca en Economía Internacional

Abstract

This project studies the factors determining comparative advantage in polluting industries. Environmental policy data at country level are combined with data on the intensity of pollution at industry level and it is shown that the countries with more permissive environmental regulations have a comparative advantage in polluting industries. In addition, the potential problem of reverse causality is considered. An instrument is proposed for environmental regulation based on the meteorological factors of the dispersion of pollution proposed by the scientific literature on air pollution. It is shown that the effect of environmental regulation on the structure of international trade is causal and comparable in magnitude to the effects of physical and human capital.

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