Is the WTO Mystery Really Solved

Abstract The WTO's impact on bilateral trade remains puzzling due, in part, to previous studies'failure to simultaneously address three issues: inclusion of zero trade, proper controls for multilateral resistance, and proper membership de…nition. Addressing all fails to suggest a positive e¤ect. JEL: F13, F1

Three New Empirical Tests of the Pollution Haven Hypothesis When Environmental Regulation is Endogenous

The validity of existing empirical tests of the Pollution Haven Hypothesis (PHH) is constantly under scrutiny due to two shortcomings. First, the issues of unobserved heterogeneity and measurement error in environmental regulation are typically ignored due to the lack of a credible, traditional instrumental variable. Second, while the recent literature has emphasized the importance of geographic spillovers in determining the location choice of foreign investment, such spatial eects have yet to be adequately incorporated into empirical tests of the PHH. As a result, the impact of environmental regulations on trade patterns and the location decisions of multinational enterprises remains unclear. In this paper, we circumvent the lack of a traditional instrument within a model incorporating geographic spillovers utilizing three novel identication strategies. Using state-level panel data on inbound U.S. FDI, relative abatement costs, and other determinants of FDI, we consistently nd (i) evidence of environmental regulation being endogenous, (ii) a negative impact of own environmental regulation on inbound FDI in pollution-intensive sectors, particularly when measured by employment, and (iii) larger eects of environmental regulation once endogeneity is addressed. Neighboring environmental regulation is not found to be an important determinant of FDI. Key Words: Foreign Direct Investment, Environmental Regulation, Spillovers, Instrumental Variables, Control Function, Heteroskedasticity

Empirical Tests Of The Pollution Haven Hypothesis When Environmental Regulation Is Endogenous

The pollution haven hypothesis (PHH) posits that production within polluting industries will shift to locations with lax environmental regulation. While straightforward, the existing empirical literature is inconclusive owing to two shortcomings. First, unobserved heterogeneity and measurement error are typically ignored due to the lack of a credible, traditional instrumental variable for regulation. Second, geographic spillovers have not been adequately incorporated into tests of the PHH. We overcome these issues utilizing two novel identification strategies within a model incorporating spillovers. Using US state-level data, own environmental regulation negatively impacts inbound foreign direct investment. Moreover, endogeneity is both statistically and economically relevant

Do Customs Union Members Engage in More Bilateral Trade than Free-Trade Agreement Members?

This paper provides the first empirical analysis directly comparing the effects of customs unions (CUs) and free-trade agreements (FTAs) on members’ bilateral trade, while addressing the biases arising from loglinearization of the gravity model and crucial time-invariant unobservables. Since Fiorentino et al. (2007) question the popularity of CUs relative to FTAs, considering the latter to be more practical in the current trading climate, such a comparison seems especially relevant. While Baier and Bergstrand (2007) find an FTA to approximately double members’ bilateral trade after 10 years, the results of this paper find CUs to have had a much larger impact than FTAs

Is the WTO mystery really solved?

The WTO’s impact on bilateral trade remains puzzling due, in part, to previous studies’ failure to simultaneously address three issues: inclusion of zero trade, proper controls for multilateral resistance, and proper membership definition. Addressing all fails to suggest a positive effect

Multilateral Environmental Agreements And The WTO

Addressing many environmental problems requires international cooperation. However, rules under the World Trade Organization (WTO) may deter participation in multilateral environmental agreements. Using a partial identification approach, we obtain strictly negative bounds for non-OECD countries in the WTO era

Energy Efficiency And Exporting: Evidence From Firm-Level Data

While exporting firms and non-exporters have been compared across several dimensions, empirical comparisons on the basis of environmental performance are relatively few. Moreover, analyzing the environmental implications of firm-level exports is not trivial due to non-random selection into exporting. In this light, we examine the impact of exporting on firms' energy efficiency by resorting to an instrumental variables strategy based on a differencing approach (Pitt and Rosenzweig, 1990). Utilizing data from Indonesia, we find (i) exporting to reduce the use of fuels (relative to electricity) and (ii) concerns over endogeneity of exporting status to be relevant