Environmental and Resource Economics

, Volume 45, Issue 4, pp 459–479

Environmental Regulation and Industry Location in Europe


    • Economics, LMBSLondon Metropolitan University
  • Reyer Gerlagh
    • Economics, School of Social SciencesUniversity of Manchester
    • Tilburg University
  • Dan Rigby
    • Economics, School of Social SciencesUniversity of Manchester
  • Ada Wossink
    • Economics, School of Social SciencesUniversity of Manchester
Open AccessArticle

DOI: 10.1007/s10640-009-9323-3

Cite this article as:
Mulatu, A., Gerlagh, R., Rigby, D. et al. Environ Resource Econ (2010) 45: 459. doi:10.1007/s10640-009-9323-3


This paper estimates the effect of environmental regulation on industry location and compares it with other determinants of location such as agricultural, education and R&D country characteristics. The analysis is based on a general empirical trade model that captures the interaction between country and industry characteristics in determining industry location. The Johnson–Neyman technique is used to fully explicate the nature of the conditional interactions. The model is applied to data on 16 manufacturing industries from 13 European countries. The empirical results indicate that the pollution haven effect is present and that the relative strength of such an effect is of about the same magnitude as other determinants of industry location. A significant negative effect on industry location is observed only at relatively high levels of industry pollution intensity.


Pollution haven hypothesisComparative advantageIndustry location
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© The Author(s) 2009