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Abstract

This paper examines how the stringency of environmental regulations impact international trade patterns. It explores the hypothesis that environmental regulation does not have a significant impact on trade. An econometric analysis is conducted for 24 countries ranging from highly developed to extremely poor to investigate whether environmental regulations have a significant impact on countries exports of pollution intensive goods. This econometric model extends Leamer (1984)'s cross-section Heckscher-Ohlin-Vanek (HOV) model by incorporating measures of stringency of environmental regulation. Correlation between capital intensity and exports are mitigated by grouping the sample countries. The results suggest that Metal, Steels, Pulp and Paper, and Chemicals Industries exhibit a negative relationship.

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