Environmental regulation and industry location in Europe

Abay Mulatu, Reyer Gerlagh, Dan Rigby, Ada Wossink

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This paper estimates the effect of environmental regulation on industry location and compares it with other determinants of location such as agricultural, education and R&D country characteristics. The analysis is based on a general empirical trade model that captures the interaction between country and industry characteristics in determining industry location. The Johnson-Neyman technique is used to fully explicate the nature of the conditional interactions. The model is applied to data on 16 manufacturing industries from 13 European countries. The empirical results indicate that the pollution haven effect is present and that the relative strength of such an effect is of about the same magnitude as other determinants of industry location. A significant negative effect on industry location is observed only at relatively high levels of industry pollution intensity. © The Author(s) 2009.
Original languageEnglish
Pages (from-to)459-479
Number of pages20
JournalEnvironmental and Resource Economics
Issue number4
Publication statusPublished - Apr 2010


  • Comparative advantage
  • Industry location
  • Pollution haven hypothesis


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