In Search of Pollution Havens? Dirty Industry in the World Economy, 1960 to 1995

TLDR

Rapid economic growth in the past three decades, especially in open economies, coincided with increasing environmental awareness and stricter pollution regulations in industrialized countries. The study tests whether the pollution‑havens hypothesis predicts accelerated growth of dirty industries in unregulated, trade‑open developing economies. The authors find that pollution displacement to developing countries has been limited, as growth spurs regulation, technology, and cleaner production, making pollution havens short‑lived.

Abstract

The past three decades have witnessed rapid economic development, particularly in countries that have pursued relatively open economic policies. Rising environmental awareness in the 1960s also led to a rapid tightening of pollution regulation in the industrial economies. According to the "pollution havens" hypothesis, the result should have been more rapid growth of dirty industries in unregulated economies that were open to international trade. Using data for the period 1960 to 1995, the authors find that the displacement of pollution to developing countries has not been a major phenomenon for several reasons. Tendencies toward formation of pollution havens have been self-limiting because economic growth has generated countervailing effects through increases in regulation, technical expertise, and investment in cleaner production. In practice, the authors argue that pollution havens have apparently been as transient as low-wage havens.