International trade and environmental policy: how effective is 'eco-dumping'?

This paper examines the effects of environmental regulations on the international competitiveness of domestic industries. A generalised GDP function, which incorporates both technology changes and increasing returns to scale is set up and a flexible translog function form is used to approximate this GDP function. A seemingly unrelated regression estimation technique is employed to estimate a system of sectoral share equations derived from the generalised GDP function. The basic hypothesis is that while the environmental factor is not a significant determinant of the international competitiveness of environmentally sensitive industries, technology is. The result supports this hypothesis and suggests that so-called eco-dumping is not an effective strategy in this context. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classifications: Q28; L50.