Trade Policy and Industrial Pollution in Latin America: Where Are the Pollution Havens?

Abstract

It is commonly assumed by economists and environmentalists alike that greater economtc "openness" will lead to increased industrial pollution in developing countries. This paper challenges the "pollution haven" hypothesis, arguing that liberalization of trade regimes and increased foreign investment in Latin America have not been associated with pollution-intensive industrial development. From case studies and econometric evidence, we conclude that protected economies are more likely to favor pollution intensive industries, while openness actually encourages cleaner industry through the importation of developed-country pollution standards.