NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Paula Bustos

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Working Papers and Chapters

August 2012Sources of Comparative Advantage in Polluting Industries
with Fernando Broner, Vasco M. Carvalho: w18337
We study the determinants of comparative advantage in polluting industries. We combine data on environmental policy at the country level with data on pollution intensity at the industry level to show that countries with laxer environmental regulation have a comparative advantage in polluting industries. Further, we address the potential problem of reverse causality. We propose an instrument for environmental regulation based on meteorological determinants of pollution dispersion identiĀ…ed by the atmospheric pollution literature. We find that the effect of environmental regulation on the pattern of trade is causal and comparable in magnitude to the effect of physical and human capital.

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