Pollution policy and exports of dirty goods: a case study of the Indian chemical sector
Student name: Ms Vasundhara Tanwar
Guide: Dr Poornima Varma
Year of completion: 2014
Host Organisation: TERI University
Abstract: The study attempts to find evidence to support the existence of the Pollution Haven Hypothesis
for India. We test if environmental regulation acts as a significant determinant of exports of dirty
commodities. Instead of looking at all the dirty sectors i.e. pollution intensive sectors ,the study
concentrates on only one dirty sector that is the chemical sector which is one of the most
important sectors both in terms of domestic production as well as international trade for India.
To test the hypothesis we employ two different methodologies, the first being the Hecksher-OhlinVanek
model that tests if domestic environmental regulation affect exports of chemicals from
India or not and the Imperfect Competition model that attempts to see how the differences in
environmental regulation across countries affects the composition of trade i.e. inter or intra
industry. Both the analyses give similar results and we find environmental regulation of India
and the differences in environmental regulations across countries to be a significant determinant
of chemical sector exports and the trade composition, with the expected affect on direction of
trade. This leads us to the conclusion that Pollution Haven effect can be said to exist, at least, for
the chemical sector of India.
