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slides_5_new - Does Economic Growth Damage the Environment?...

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1 Does Economic Growth Damage the Environment? Great Question Must be answered on a case by case basis: Ambient smog get different answer Than Greenhouse Gas Emissions What triggers Government getting involved to address the issue?
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The “Amazing Race” Scale Composition Technique In the case of vehicle emissions E = Pop*Prob*Mile*E How does capitalism affect each of these? 22
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3 The Pollution Havens Hypothesis Environmentalists wonder if richer nations are cleaner because in a “globalized” world economy, they have “outsourced” dirty activity to poorer nations If this was the case, then in a world without free trade, poorer nations would be cleaner and richer nations would be dirtier
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4 Trade Dimensions Trade in Manufacturing Goods Trade in Agricultural Goods – what would be a “pollution haven” in this case? Trade in Waste --- very hard to get data on this Trade in Natural Resources (we will return to this topic)
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5 Comparative Advantage in Dirty Goods Conventional Wisdom in economics right now is that poorer nations do not have a comparative advantage in dirty goods due to their high “capital/labor” inputs in production Factor Endowment hypothesis predicts that richer nations will be the pollution havens
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6 Debate Environmental economists have found little evidence in support of the international pollutions havens hypothesis Empirical efforts focusing on trade composition and FDI flows World Bank Economists have argued that LDC nations receiving foreign direct investment have experienced declining pollution levels
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7
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8 Zheng and Kahn (2010) FDI investment over time across China’s major cities Air pollution is lower in cities receiving the FDI Why?
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9 Domestic Pollution Havens May Why? Environmental and Labor regulation is not spatially uniform States differ with respect to the severity of their regulation Two empirical lines of research have documented the unintended consequences of differential regulation
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10 Environmental Regulation A set of empirical papers have documented “deflection” effects induced by Clean Air Act regulation (see Henderson 1996, Kahn 1997, Becker and Henderson 1999, Greenstone 2002) An unintended consequence of differential C.A.A regulation is to push manufacturing to less regulated areas
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11 Kahn’s Punchline Due to the Factor Endowment hypothesis
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slides_5_new - Does Economic Growth Damage the Environment?...

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