Economies Of Scale, The "pollution Haven" Hypothesis

The attention has been paid increasingly on the harmonious development of economic, trade and environment. Many experts and scholars have been working on it and have made a lot of achievements in theoretical and empirical studies. They linked the pollution-intensive industrial transfer phenomena to the differences of environmental regulations during their research, and formed the"Pollution Haven"Hypothesis (PHH). The hypothesis holds that the pollution-intensive industrial will migrate from the countries with more stringent environmental regulations to the countries with lax environmental regulations, for the latter countries have a comparative advantage in the production. Now there is a consensus that the hypothesis will true when countries only have different environmental regulations. It means that all countries are same except the environmental regulations, which is unreality. And the empirical research found that some of the highest pollution-intensive products are often produced in high-income countries (they have more stringent environmental regulations) and exported from them. All these show that"Pollution Haven"Hypothesis (PPH) does not exist in reality, do they? But some evidences in some empirical studies have supported the hypothesis. To solve this Antweiler, Copeland and Taylor (2001) introduced the factor endowment differences to the theoretical model and found the hypothesis comes true or not that depends on the joint effect of environmental regulations differences and factor endowments differences. Jingyan Fu (2010) later expanded their analysis base on their analytical framework and made the same conclusion.However, economies of scale and trade theory in new trade theory reveal that economies of scale can enable one country the comparative advantage in production even if there has no factor endowment differences. Hence, on the basis of the former achievements, this paper tries to establish a theoretical model with economies of scale to study the"Pollution Haven"Hypothesis on the condition of scale economy. And draw the conclusions as follow.(1)In the other conditions being equal, pollution-intensive industrial will concentrate in the countries with lax environmental regulations, which we worry about. That is,"Pollution Haven"Hypothesis (PPH) will true in the condition that exists only different environmental regulations.(2)In considering the influence of economies of scale, where to produce the pollution-intensive productions is determined by the joint effect of different degrees of scale economy and different environmental regulations. Moreover, even in the same environmental regulations, the different degree economies of scale will make the pollution-intensive industrial concentrated in the countries which own higher degree of scale economy. If two countries have different environmental regulations and different degrees of scale economy at the same time, the pollution-intensive industrial will not always concentrate in the country with lax environmental regulations, because the scale economy has a positive impact on the comparative advantage in production, which can offset the negative impact that is cause by the more stringent environmental regulations.(3)The impact on the pollution-intensive industrial concentrated, which is cause by factor endowment differences, cannot be ignored. This is reflected early in the former theoretical and empirical research. The model in this paper shows that pollution-intensive industrial will concentrate in the country with abundant production factor under the same conditions. Further, pollution-intensive industrial concentrates or not rely on the joint impact of different relative factor endowments, different environmental regulations and different degrees of scale economy.