Matthew A. Cole

The environmental Kuznets curve: an empirical analysis

This paper examines the relationship between per capita income and a wide range of environmental indicators using cross-country panel sets. The manner in which this has been done overcomes several of the weaknesses asscociated with the estimation of environmental Kuznets curves (EKCs). outlined by Stern et al. (1996). Results suggest that meaningful EKCs exist only for local air pollutants whilst indicators with a more global, or indirect, impact either increase monotonically with income or else have predicted turning points at high per capita income levels with large standard errors – unless they have been subjected to a multilateral policy initiative. Two other findings are also made: that concentration of local pollutants in urban areas peak at a lower per capita income level than total emissions per capita; and that transport-generated local air pollutants peak at a higher per capita income level than total emissions per capita. Given these findings, suggestions are made regarding the necessary future direction of environmental policy.

Determining the trade-environment composition effect: the role of capital, labor and environmental regulations

This paper argues that pollution-intensive sectors may be subject to opposing forces of comparative advantage since these sectors are also typically capital intensive, yet regions with low environmental regulations tend to be those that are the least capital abundant. We examine therefore, whether compositional changes in pollution arising from trade liberalization originate due to differences in capital–labor endowments and/or differences in environmental regulations. The contribution of the paper is threefold; first, we provide a comprehensive empirical analysis of the determinants of four common pollutants, paying particular attention to the nature of the trade-induced composition effect; second, we investigate whether the result of Antweiler et al. (Amer. Econom. Rev. 91 (2001) 877), who find evidence that both environmental regulations and capital–labor endowments determine sulfur dioxide concentrations, also holds for sulfur dioxide emissions; third, we examine whether this result holds for altogether different pollutants. Our results, while providing partial support for Antweiler et al., also raise a number of points for discussion.

FDI and the Capital Intensity of "Dirty" Sectors: A Missing Piece of the Pollution Haven Puzzle

In an increasingly integrated world, falling trade barriers mean that the role environmental regulations play in shaping a countrys comparative advantage is greater than ever. This has lead to fears that “dirty” industries will relocate to developing regions where environmental regulations may be less stringent. A number of reasons have been offered to explain why, despite anecdotal evidence and the predictions of theoretical studies, little empirical verification for the existence of pollution havens has been found. Little attention, however, has been paid to the capital intensity of pollution intensive sectors. We investigate the relationship between US outward FDI and factor endowments across sectors to two developing countries. We highlight the role of capital and believe it partially explains why pollution havens are not more widespread. Our approach also highlights those countries that are likeliest to become pollution havens. A multivariate analysis reveals some evidence of pollution haven consistent behavior.

Endogenous Pollution Havens: Does FDI Influence Environmental Regulations?

We suggest a novel perspective on the relationship between the stringency of environmental policies and foreign direct investment (FDI). We develop a political economy model with imperfect product market competition where local and foreign firms jointly lobby the local government for a favorable pollution tax. FDI is found to affect environmental policy, and the effect is conditional on the local governments degree of corruptibility. If the degree of corruptibility is sufficiently high (low), FDI leads to less (more) stringent environmental policy, and FDI thus contributes to (mitigates) the creation of a pollution haven. Our empirical results using panel data from 33 countries support the predictions of the model.

Industrial Characteristics, Environmental Regulations and Air Pollution: An Analysis of the UK Manufacturing Sector

This paper examines and quantifies the complex linkages between industrial activity, environmental regulations and air pollution. Couched in terms of the demand for, and the supply of, environmental services we utilize a new dataset of UK industry specific emissions for a variety of pollutants between 1990 and 1998. Our analysis allows us to investigate the role played by different determinants of emissions intensity. We find pollution intensity to be a positive function of energy use and physical and human capital intensity. Conversely, we find pollution intensity to be a negative function of the size of the average firm in an industry, the productivity of an industry and the industrys expenditure on capital and research and development. Our results also indicate that regulations, both formal and informal, have been successful in reducing pollution intensity.

Development, trade, and the environment: how robust is the Environmental Kuznets Curve?

This paper assesses the strength of the Environmental Kuznets Curve (EKC) which posits an inverted-U relationship between per capital income and pollution. Specifically, answers are sought to the following related questions: (1) How robust is the EKC relationship?; (2) To what extent can the EKC relationship be explained by changing trade patterns as opposed to growth-induced pollution abatement? With regard to question (1), the alleged weaknesses with the EKC are assessed and new EKCs are estimated using more appropriate econometric techniques. Turning to question (2), it is argued that the impact of trade liberalization on the environment will differ from country to country depending on whether or not they have a comparative advantage in pollution-intensive production. In turn, it is argued that this depends on a countrys relative factor endowments and/or its relative environmental regulations. EKCs are therefore estimated in a manner that allows the impact of trade liberalization on pollution to depend on these country characteristics. The results indicate that the inverted-U relationship between per capita income and emissions is reasonably robust and little evidence is found to suggest that trade patterns are a significant determinant of the inverted-U shape.

On visible choice sets and scope sensitivity

Abstract In this paper we argue that the burgeoning empirical debate over scope sensitivity within contingent valuation studies is fundamentally incomplete in that it has neglected a systematic examination of certain effects of study design upon observed scope sensitivity. In particular we highlight the fact that in certain study designs the choice set initially offered (or “visible”) to respondents is changed in a stepwise manner as they progress through a valuation exercise, while other designs involve advance disclosure regarding the full extent of the final visible choice set prior to any choices or values being elicited. The issue of changes in the visible choice set is alluded to by Smith (J. Environ. Econom. Manage. 22(1) 71), who identifies this as a primary challenge to Kahneman and Knetschs (J. Environ. Econom. Manage. 22(1) 57), well-known experimental results. Kahneman and Knetsch contend that it seems “highly implausible that this minor procedural change would significantly alter results” (p. 61), but do not test this assertion. We present experimental and field tests of the impact upon contingent values of varying the visible choice set through stepwise and advance disclosure. These dimensions of design are interacted with changes in the order in which nested goods are presented (bottom-up versus top-down). When a stepwise disclosure procedure is adopted, the observed scope sensitivity is substantially and significantly affected by the order in which goods are presented but such procedural variance is not observed within advance disclosure designs. Conjectures regarding the origin and implications of such findings are presented.

Corruption, Governance and FDI Location in China: A Province-Level Analysis

Abstract Chinas recent rapid growth has been matched by large increases in exports and foreign direct investment (FDI), but considerable regional disparities in FDI flows exist. We use detailed province level data for China to examine the determinants of intra-country FDI flows. Specifically, we investigate whether FDI is attracted to those regions that exhibit good governance and are most strongly engaged in the fight against corruption, constructing proxies for provincial government efficiency and anti-corruption effort. Our regression results confirm that FDI is attracted to provinces with relatively high levels of government efficiency and are actively involved in the fight against corruption.

Economic growth and water use

In recent years the issue of global water scarcity has attracted increasing attention within academia, non-governmental organizations and the media. The aim of this short note is to ascertain whether there is a systematic relationship between water use and income, and particularly whether an inverted U-shaped relationship exists, as has been found for other resources and pollutants. Using a new data set of water use, evidence of such a relationship is provided, suggesting that water use may benefit from composition and technique effects. While this finding appears optimistic, regional forecasts are made that suggest that levels of water use in developing regions will continue to increase for many years to come. The implications of these findings are discussed.

Why the grass is not always greener: the competing effects of environmental regulations and factor intensities on US specialization

The global decline in trade barriers means that environmental regulations now potentially play an increasingly important role in shaping a country’s comparative advantage. This raises the possibility that pollution intensive industries will relocate from high regulation countries to developing regions where environmental regulations may be less stringent. We assess the evidence for this possibility by examining the USA’s revealed comparative advantage (RCA) and other measures of specialization. We demonstrate that US specialization in pollution intensive sectors is neither lower, nor falling more rapidly (or rising more slowly) than in any other manufacturing sector. We offer an explanation for this finding. Our analysis suggests that pollution intensive industries have certain characteristics specifically they are intensive in the use of physical and human capital that makes developing countries less attractive as a target for relocation. We demonstrate econometrically the economic and statistical significance of these factors and illustrate how they appear to oppose the effects of environmental regulations as determinants of US specialization. JEL codes: Q28, R38, F23