The past three decades have witnessed rapid economic development, particularly in countries that have pursued relatively open economic policies. Rising environmental awareness in the 1960s also led to a rapid tightening of pollution regulation in the industrial economies. According to the "pollution havens" hypothesis, the result should have been more rapid growth of dirty industries in unregulated economies that were open to international trade. Using data for the period 1960 to 1995, the authors find that the displacement of pollution to developing countries has not been a major phenomenon for several reasons. Tendencies toward formation of pollution havens have been self-limiting because economic growth has generated countervailing effects through increases in regulation, technical expertise, and investment in cleaner production. In practice, the authors argue that pollution havens have apparently been as transient as low-wage havens.

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This paper examines the reasons whycorruption and policy distortions tend toexhibit a high degree of persistence incertain regimes. We identify circumstancesunder which a firm seeks to evaderegulations through (i) bribery of localinspectors, and (ii) by lobbying high-levelgovernment politicians to resist legalreforms designed to improve judicialefficiency (rule of law) and eliminatecorruption. We show that in some casespolitical instability reinforces thesetendencies. The analysis predicts that inpolitically unstable regimes, theinstitutions necessary to monitor andenforce compliance are weak. In suchcountries, corruption therefore is morepervasive, and the compliance withregulations is low. We test thesepredictions using cross-country data. Theempirical results support the predictionsof the model. Political instability reducesjudicial efficiency, which in turnstimulates corruption. Thus, the effect ofpolitical instability on corruption is notdirect, but occurs indirectly via itseffect on the degree of judicialefficiency. Finally, corruption lowers thelevel of regulatory compliance. Thus,political instability indirectly affects compliance, via judicial efficiency andcorruption. Copyright Kluwer Academic Publishers 2004

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quicklv, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. 'hr findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent ,he view of the W'orld Bank, its Executive Directors, or the countries they represent.

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The Policy Research Working Paper Series disseminates the findings of Cork in progress to encourage the excbange of ideas about development issues. An objective of the series is to get the findings outgquickly, even if the presentations are less than fully polisbed. The papers carry the names of the authtors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the autbors. They do not trecessarily represent the lviewo of the World Bank, its Executive Directors, or the countries they represent.

This paper examines the implications for the use of trade measures as “weapons” to address global environmental concerns. There are already proposals in the U.S. senate to impose an environmental tariff against foreign nations whose cost advantages stem from less stringent environmental standards than the U.S. The paper argues that trade policy measures typically are not the first best instruments for achieving environmental objectives. Even theoretically they could be shown to be welfare improving only under a very narrow range of circumstances. Their use in place of more efficient policy instruments may not only end up distorting the patterns of world trade but also may worsen the overall patterns of environmental quality. Simulation exercises undertaken here suggest that it is highly unlikely that countries would alter their environmental behavior because of the imposition of the proposed U.S. tariff. Hence the proposed legislation has very uncertain environmental consequences. Even if the policy has been mainly designed to protect domestic industries, it would only provide a minor margin of protection because the costs of complying with the environmental standards represent a relatively small element in the total costs. The analysis suggests that trade policy introduced in this fashion will have no significant impact on the patterns of world trade and pollution. Copyright Kluwer Academic Publishers 1996environmental tariff, pollution abatement expenditures, pollution-intensity, trade policy, transnational pollution,

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