International Competitiveness and Environmental Regulations
In the second part of our exposition on trade and the environment, we will try to identify the impact of environmental regulations on the competitiveness of the firms regulated. This is a concern both for the developed and developing countries. Developed countries fear that higher environmental regulations at home may cause a relocation of domestic industries to countries with lax environmental regulations. On the other hand, concerns of developing countries stem from the harmonization of environmental standards across countries (albeit differences in incomes) and/or trade bans on their exports because of environmental standards. This subject is a hot topic nowadays, and we will try to explore different aspects in the following chapters. Both the empirical and theoretical literature will be summarized.
KeywordsEnvironmental Regulation Domestic Firm International Competitiveness Profitable Opportunity Innovative Capability
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- 1.Palmer et al. (1995) state that “The model essentially formalizes the basic point that the addition (or thightening) of constraints on a firm’s set of choices can not be expected to result in an increased level of profits.”Google Scholar
- 2.The terms static and dynamic should not be considered in terms of a model that has an explicit time dimension, but rather in terms of the possibilities of innovation and other possible changes.Google Scholar
- 3.This is also valid for Lanjouw and Mody (1996) study mentioned above as past environmental regulations in many countries have been in the form of command-and-control.Google Scholar