Pollution & the Struggle for the World Product

Since the early 1970s, observers have noted that complying with environmental regulations might be a significant new factor in determining the locations of industries involved in world trade. Two related hypotheses have been offered to explain how environmental regulations are altering international comparative advantage in industrial production: first, that stringent regulations push industries out of the United States and other advanced industrial nations (the 'industrial flight' hypothesis); second, that less developed countries compete to attract multinational industries by minimizing their own regulations (the 'pollution haven' hypothesis). This study examines the validity of the industrial-flight and pollution-haven hypotheses within a broad political and economic framework of theories purporting to explain international trade and investment.