Skip to main content

Advertisement

SpringerLink
Log in

Trade-based adoption of voluntary environmental programs in the developing world: Racing to the top or stuck in the mud?

  • Research Article
  • Published:
Policy Sciences Aims and scope Submit manuscript

Abstract

Scholars have consistently found that firms in developing countries adopt voluntary environmental programs (VEPs) in high numbers when their major trade partners are home to many VEP-certified firms. This reflects the following dynamic: Importers based in countries with many VEP-certified facilities demand similarly sustainable production processes from trade partners, and so exporting firms in partner countries adopt VEPs to signal their sustainable practices. Studies have identified characteristics of developing countries that make local exporting firms more likely to adopt VEPs as a signal; however, there has been little analysis as to the country-level characteristics that make importers more (or less) likely to demand VEPs from suppliers abroad, beyond having many VEP-certified firms themselves. This study considers this matter, theorizing that VEP diffusion only accompanies exporting to countries with high levels of income and education, as well as a high number of VEP-certified firms. Panel data analysis provides support for the theory, showing that developing countries only experience trade-based diffusion of ISO 14001 (a widely adopted VEP) through their exports to countries with high income and/or education levels. In contrast, exporting to countries that lack these characteristics creates no such diffusion, even where importing countries’ VEP certification levels are high. Instead, such trade produces a “stuck in the mud” effect, as developing countries’ certification levels stagnate even as those of their import partners rise.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. See Vogel (2008) for a thorough review of this scholarship. See also Andrews (1998) for discussion of firm-level environmental self-regulations.

  2. There are a wide variety of VEPs and they vary in design and effect; see Darnall and Carmin (2005).

  3. See Arimura et al. (2016) for literature review and discussion as to the effects of ISO 14001 adoption on environmental performance.

  4. Evidence for a race to the bottom in other areas of social development is more mixed. For example, Kaufman and Segura-Ubiergo (2001) find that economic openness is accompanied by decreasing rates of social spending in developing countries, whereas Rodrik (1998) finds that countries that are more open to trade have higher levels of government spending. Studies of labor rights have also produced mixed results: Davies and Vadlamannati (2013) find that competition for foreign investment has driven down labor standards in developing countries, whereas Greenhill et al. (2009) find that good labor laws diffuse through trade.

  5. The term “California effect” was introduced by Vogel (1995), who observed that US states followed California’s lead in adopting stringent emission standards.

  6. Work by Perkins and Neumayer (2012) and Saikawa (2013) finds that this pattern is also evident in the diffusion of emissions standards policy.

  7. It should be noted that there is some reason to think that VEP adoption produces economic benefits for firms (Rivera 2002), although evidence is decidedly mixed (Blackman and Rivera 2011).

  8. It should be noted that firms in the USA were slower than those in Japan and the European Union to adopt ISO 14001 or to demand adoption from suppliers abroad (Delmas 2000).

  9. The literature also identifies several variables contributing to green consumption that are not readily analyzable at the cross-national level, such as emotions, habits, and personal norms See Joshi and Rahman (2015) and Peattie (2010) for meta-analyses of individual and situational factors that contribute to green purchasing decisions.

  10. The sample countries are listed in Table 6 in Appendix.

  11. GDP is adjusted for purchasing power parity (PPP). Data for this variable was provided by Berliner and Prakash (2013), who also use this measure in their analysis.

  12. This alternative variable is analyzed below in a robustness test.

  13. Variants of this approach were used by Gamso (2017a, b).

  14. The Atlas methodology is explained in detail here: https://datahelpdesk.worldbank.org/knowledgebase/articles/378832-the-world-bank-atlas-method-detailed-methodology.

  15. Data for education is drawn from Barro and Lee (2013). These data are recorded in five year intervals (1950, 1955, 1960, 1965, and so on). I matched this with my dataset such that country-years after each observation were informed by that observation; thus, if a country had an education rate of 9 percent in 2000 and 11 percent in 2005, then it was grouped in the lower education categorization from 2000 through 2004, and in the high education categorization from 2005 through 2009.

  16. Schooling may be more rigorous in some countries than in others, such that an individual who has completed tertiary school in, for example, Egypt, may be less well trained in some regards than an individual who did not complete tertiary school in the USA. Nevertheless, I treat education levels consistently across countries, following the classifications from Barro and Lee (2013).

  17. See Table 7 in Appendix for a list of country-years in each category.

  18. Literature on other VEPs suggests that characteristics of CEOs may also be a contributing factor (Rivera and De Leon 2005), although to my knowledge this has not been attended to with regards to ISO 14001.

  19. Descriptive statistics for all of the variables analyzed in this study are featured in Table 8 in Appendix. A correlation matrix of independent variables is provided in Table 9 in Appendix (STATA omits variables automatically if severe collinearity is detected; no such collinearity is evident in the models analyzed for this paper).

  20. Data for this variable was provided by Berliner and Prakash (2013).

  21. The alternative approach for count data, a Poisson model, underestimates standard errors in cases of overdispersion, whereas a negative binomial model estimates a dispersion parameter and, therefore, allows analysis of overdispersed counts.

  22. In effect, (X − mean(X))3 can serve as an instrument for X.

  23. There are no results to display, but I include the code in my replication materials (available on request).

  24. Recent firm-level work does indicate that FDI produces effects consistent with a race to the bottom under some circumstances and effects consistent with a race to the top in other circumstances (Bu and Wagner 2016).

References

  • Adolph, C., Quince, V., & Prakash, A. (2017). The shanghai effect: Do exports to China affect labor practices in Africa? World Development, 89(1), 1–18.

    Article  Google Scholar 

  • Aertsens, J., Mondelaers, K., Verbeke, W., Buysse, J., & Van Huylenbroeck, G. (2011). The influence of subjective and objective knowledge on attitude, motivations and consumption of organic food. British Food Journal, 113(11), 1353–1378.

    Article  Google Scholar 

  • Akbostanci, E. G., Tunc, I., & Turut-Asik, S. (2007). Pollution haven hypothesis and the role of dirty industries in Turkey’s exports. Environment and Development Economics, 12(2), 297–322.

    Article  Google Scholar 

  • Andrews, R. N. L. (1998). Environmental regulation and business ‘self-regulation’. Policy Sciences, 31(3), 177–197.

    Article  Google Scholar 

  • Arimura, T. H., Darnall, N., Ganguli, R., & Katayama, H. (2016). The effect of ISO 14001 on environmental performance: Resolving equivocal findings. Journal of Environmental Management, 166, 556–566.

    Article  Google Scholar 

  • Baek, K. (2017). The diffusion of voluntary environmental programs: The case of ISO 14001 in Korea, 1996–2011. Journal of Business Ethics, 145(2), 325–336.

    Article  Google Scholar 

  • Bansal, P., & Hunter, P. (2003). Strategic explanations for early adoption of ISO 14001. Journal of Business Ethics, 46(3), 289–299.

    Article  Google Scholar 

  • Barro, R., & Lee, J. (2013). A new data set of educational attainment in the world, 1950–2010. Journal of Development Economics, 104, 184–198.

    Article  Google Scholar 

  • Bartkus, K. R., Hartman, C. L., & Howell, R. D. (1999). The measurement of consumer environmental knowledge: Revisions and extensions. Journal of Social Behavior and Personality, 14(1), 129–146.

    Google Scholar 

  • Bellemare, M. F., Masaki, T., & Pepinsky, T. B. (2017). Lagged explanatory variables and the estimation of causal effects. The Journal of Politics, 79(3), 949–963.

    Article  Google Scholar 

  • Bellesi, F., Lehrer, D., & Tal, A. (2005). Comparative advantage: The impact of ISO 14001 environmental certification on exports. Environmental Science and Technology, 39(7), 1943–1953.

    Article  Google Scholar 

  • Berliner, D., & Prakash, A. (2013). Signaling environmental stewardship in the shadow of weak governance: The global diffusion of ISO 14001. Law & Society Review, 47(2), 345–373.

    Article  Google Scholar 

  • Berliner, D., & Prakash, A. (2014). Public authority and private rules: How domestic regulatory institutions shape the adoption of global private regimes. International Studies Quarterly, 58(4), 793–803.

    Article  Google Scholar 

  • Bia, M., & Mattei, A. (2008). A stata package for the estimation of the dose-response function through adjustment for the generalized propensity score. The Stata Journal, 8(3), 354–373.

    Google Scholar 

  • Blackman, A., & Rivera, J. (2011). Producer-level benefits of sustainability certification. Conservation Biology, 25(6), 1176–1185.

    Article  Google Scholar 

  • Bu, M., & Wagner, M. (2016). Racing to the bottom and racing to the top: The crucial role of firm characteristics in foreign direct investment choices. Journal of International Business Studies, 47, 1032–1057.

    Article  Google Scholar 

  • Chan, R. Y. K., & Lau, L. B. Y. (2000). Antecedents of green purchase: A survey in China. Journal of Consumer Marketing, 17(4), 338–357.

    Article  Google Scholar 

  • Cole, M. A. (2004). Trade, the pollution haven hypothesis and the environmental kuznets curve: Examining the linkages. Ecological Economics, 48(1), 71–81.

    Article  Google Scholar 

  • Connell, K. Y. H. (2010). Internal and external barriers to eco-conscious apparel acquisition. International Journal of Consumer Studies, 34(3), 279–286.

    Article  Google Scholar 

  • Copeland, B. R., & Taylor, M. S. (2004). Trade, growth, and the environment. Journal of Economic Literature, 42(1), 7–71.

    Article  Google Scholar 

  • Curkovic, S., & Sroufe, R. (2011). Using ISO 14001 to promote a sustainable supply chain strategy. Business Strategy and the Environment, 20(2), 71–93.

    Article  Google Scholar 

  • Darnall, N., & Carmin, J. (2005). Greener and Cleaner? The signaling accuracy of U.S. Voluntary environmental programs. Policy Sciences, 38(2–3), 71–90.

    Article  Google Scholar 

  • Davies, R. B., & Vadlamannati, K. C. (2013). A race to the bottom in labor standards? An empirical investigation. Journal of Development Economics, 103, 1–14.

    Article  Google Scholar 

  • Delmas, M. A. (2000). Barriers and incentives to the adoption of ISO 14001 by firms in the United States. Duke Environmental Law & Policy Forum, 11(1), 1–38.

    Google Scholar 

  • Delmas, M., & Montiel, I. (2008). The diffusion of voluntary international management standards: Responsible care, ISO 9000, and ISO 14001 in the chemical industry. Policy Studies Journal, 36(1), 65–93.

    Article  Google Scholar 

  • Drezner, D. W. (2001). Globalization and policy convergence. International Studies Review, 3(1), 53–78.

    Article  Google Scholar 

  • Esty, D. C., & Geradin, D. (1998). Environmental protection and international competitiveness: A conceptual framework. Journal of World Trade, 32(3), 5–46.

    Google Scholar 

  • Eze, U. C., & Ndubisi, N. O. (2013). Green buyer behavior: Evidence from Asia consumers. Journal of Asian and African Studies, 48(4), 413–426.

    Article  Google Scholar 

  • Gamso, J. (2017a). Trade partnerships and environmental performance in developing countries. Journal of Environment and Development, 26(4), 375–399.

    Article  Google Scholar 

  • Gamso, J. (2017b). South–south trade and collective labour laws: Do developing countries race to the top when they trade with the South? Journal of International Relations and Development. https://doi.org/10.1057/s41268-017-0124-y.

    Article  Google Scholar 

  • Gelissen, J. (2007). Explaining popular support for environmental protection: A multilevel analysis of 50 nations. Environment and Behavior, 39(3), 392–415.

    Article  Google Scholar 

  • Greenhill, B., Mosley, L., & Prakash, A. (2009). Trade-based diffusion of labor rights: A panel study, 1986–2002. American Political Science Review, 103(04), 669–690.

    Article  Google Scholar 

  • Grossman, G. M., & Krueger, A. B. (1993). Environmental impacts of a North American free trade agreement. In P. M. Garber (Ed.), The Mexico-US free trade agreement (pp. 13–56). Cambridge: MIT Press.

    Google Scholar 

  • Haron, S. A., Paim, L., & Yahata, N. (2005). Towards sustainable consumption: An examination of environmental knowledge among malaysians. International Journal of Consumer Studies, 29(5), 426–436.

    Article  Google Scholar 

  • Holzinger, K., & Sommerer, T. (2011). ‘Race to the bottom’ or ‘race to brussels’? Environmental competition in Europe. Journal of Common Market Studies, 49(2), 315–339.

    Article  Google Scholar 

  • International Monetary Fund. (2014). Direction of trade statistics. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor]. https://doi.org/10.3886/ICPSR07628.v2.

  • Joshi, Y., & Rahman, Z. (2015). Factors affecting green purchase behavior and future research directions. International Strategic Management Review, 3(1–2), 128–143.

    Article  Google Scholar 

  • Kaufman, R. R., & Segura-Ubiergo, A. (2001). Globalization, domestic politics, and social spending in latin America: A time-series cross-section analysis, 1973–97. World Politics, 53(4), 553–587.

    Article  Google Scholar 

  • Kollman, K., & Prakash, A. (2002). EMS-based environmental regimes as club goods: Examining variations in firm-level adoption of ISO 14001 and EMAS in U.K., U.S. and Germany. Policy Sciences, 35(1), 43–67.

    Article  Google Scholar 

  • Kopstein, J. S., & Reilly, D. A. (2000). Geographic diffusion and transformation of the post-communist world. World Politics, 53(1), 1–37.

    Article  Google Scholar 

  • Kortelainen, K. (2008). Global supply chains and social requirements: Case studies of labour condition auditing in the People’s Republic of China. Business Strategy and the Environment, 17(7), 431–433.

    Article  Google Scholar 

  • Lea, E., & Worsley, A. (2008). Australian consumers’ food-related environmental beliefs and behaviors. Appetite, 50(2), 207–214.

    Article  Google Scholar 

  • Lewbel, A. (1997). Constructing instruments for regressions with measurement error when no additional data are available, with an application to patents and R&D. Econometrica, 65(5), 1201–1213.

    Article  Google Scholar 

  • Mabey, N., McNally, R., & Zarsky, L. (2003). Foreign direct investment and the environment: From pollution havens to sustainable development (2nd ed.). Vaud: World Wide Fund for Nature, WWF-UK Report.

    Google Scholar 

  • Marcoux, C., & Urpelainen, J. (2012). Dynamics of spatial interdependence: The convergent effects of international trade on voluntary environmental standards. Environment and Planning C: Government and Policy, 30(5), 871–890.

    Article  Google Scholar 

  • Neumayer, E. (2001). Do countries fail to raise environmental standards? An evaluation of policy options addressing ‘regulatory chill’. International Journal of Sustainable Development, 4(3), 231–244.

    Article  Google Scholar 

  • Neumayer, E., & Perkins, R. (2004). What explains the uneven take-up of ISO 14001 at the global level? A panel-data analysis. Environment and Planning A, 36(5), 823–839.

    Article  Google Scholar 

  • Peattie, K. (2010). Green consumption: Behavior and norms. Annual Review of Environment and Resources, 35, 195–228.

    Article  Google Scholar 

  • Perkins, R., & Neumayer, E. (2012). Does the ‘California effect’ operate across borders? Trading- and investing-up in automobile emission standards. Journal of European Public Policy, 19(2), 217–237.

    Article  Google Scholar 

  • Porter, G. (1999). Trade competition and pollution standards: “Race to the bottom” or “stuck at the bottom”. The Journal of Environment and Development, 8(2), 133–151.

    Article  Google Scholar 

  • Posthuma, A. (2010). Beyond “regulatory enclaves”: Challenges and opportunities to promote decent work in global production networks. In A. Posthuma & D. Nathans (Eds.), Labor in global production networks in India (pp. 57–80). Oxford: Oxford University Press.

    Google Scholar 

  • Potoski, M. (2001). Clean air federalism: Do states race to the bottom? Public Administration Review, 61(3), 335–342.

    Article  Google Scholar 

  • Prakash, A., & Potoski, M. (2006). Racing to the bottom? Trade, environmental governance, and ISO 14001. American Journal of Political Science, 50(2), 350–364.

    Article  Google Scholar 

  • Prakash, A., & Potoski, M. (2007). Investing up: FDI and the cross-country diffusion of ISO 14001 management systems. International Studies Quarterly, 51(3), 723–744.

    Article  Google Scholar 

  • Prakash, A., & Potoski, M. (2016). The EU effect: Does trade with the EU reduce CO2 emissions in the developing world. Environmental Politics, 26(1), 27–48.

    Article  Google Scholar 

  • Preuss, L. (2005). Rhetoric and reality of corporate greening: A view from the supply chain management function. Business Strategy and the Environment, 14(2), 123–139.

    Article  Google Scholar 

  • Rivera, J. (2002). Assessing a voluntary environmental initiative in the developing world: The Costa Rican certification for sustainable tourism. Policy Sciences, 35(4), 333–360.

    Article  Google Scholar 

  • Rivera, J., & De Leon, P. (2005). Chief executive officers and voluntary environmental performance: Costa Rica’s certification for sustainable tourism. Policy Sciences, 38(2–3), 107–127.

    Article  Google Scholar 

  • Rivera, J., & Oh, C. H. (2013). Environmental regulations and multinational corporations’ foreign market entry investments. Policy Studies Journal, 41(2), 243–272.

    Article  Google Scholar 

  • Rodrik, D. (1998). Why do more open economies have bigger governments? Journal of Political Economy, 106(5), 997–1032.

    Article  Google Scholar 

  • Roht-Arriaza, N. (1997). Environmental management system and environmental protection. Journal of Environment and Development, 6(3), 292–316.

    Article  Google Scholar 

  • Saikawa, E. (2013). Policy diffusion of emission standards: Is there a race to the top? World Politics, 65(01), 1–33.

    Article  Google Scholar 

  • Sheldon, I. (2006). Trade and environmental policy: A race to the bottom? Journal of Agricultural Economics, 57(3), 365–392.

    Article  Google Scholar 

  • Simmons, B., & Elkins, Z. (2004). The globalization of liberalization. American Political Science Review, 98(1), 171–189.

    Article  Google Scholar 

  • Studer, S., Welford, R., & Hills, P. (2006). Engaging Hong Kong business in environmental change: Drivers and barriers. Business Strategy and the Environment, 15(6), 416–431.

    Article  Google Scholar 

  • Vachon, S., & Klassen, R. D. (2007). Supply chain management and environmental technologies: The role of integration. International Journal of Production Research, 45(2), 401–423.

    Article  Google Scholar 

  • Vogel, D. (1995). Trading up: Consumer and environmental regulation in a global economy. Cambridge: Harvard University Press.

    Google Scholar 

  • Vogel, D. (2008). Private global business regulation. Annual Review of Political Science, 11, 261–282.

    Article  Google Scholar 

  • Wu, J., & Ma, Z. (2016). Export intensity and MNE customers’ environmental requirements: Effects on local Chinese suppliers’ environmental strategies. Journal of Business Ethics, 135(2), 327–339.

    Article  Google Scholar 

  • Zarsky, L. (1997). Stuck in the mud? Nation-states, globalization, and environment. Globalization and environment—preliminary perspectives (pp. 27–51). Paris: Organization for Economic Co-operation and Development.

    Google Scholar 

  • Zeng, K., & Eastin, J. (2007). International economic integration and environmental protection: The case of China. International Studies Quarterly, 51(4), 971–995.

    Article  Google Scholar 

  • Zeng, K., & Eastin, J. (2012). Do developing countries invest up? The environmental effects of foreign direct investment from less-developed countries. World Development, 40(11), 2221–2233.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Thunderbird School of Global Management, Arizona State University, 1 Global Place, Glendale, AZ, 85306, USA

    Jonas Gamso

Authors
  1. Jonas Gamso
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Jonas Gamso.

Appendix

Appendix

See Tables 6, 7, 8, and 9.

Table 6 Countries in sample
Full size table
Table 7 Country categorizations for independent variables
Full size table
Table 8 Descriptive statistics
Full size table
Table 9 Correlation matrix
Full size table

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Gamso, J. Trade-based adoption of voluntary environmental programs in the developing world: Racing to the top or stuck in the mud?. Policy Sci 51, 515–543 (2018). https://doi.org/10.1007/s11077-018-9319-3

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11077-018-9319-3

Keywords

Search

Navigation