Global waste trade: Comparative advantage, the pollution haven effect, and externality costs

Abstract

I quantify how comparative advantage and the pollution haven effect (PHE) shape international waste flows and infer the associated externality costs by constructing a Ricardian model with generation, trade, and use as a production input of waste. Combining waste flow, tariff, and environmental regulation data with a meteorological pollution dispersion instrument, I estimate that a 1% increase in trade costs reduces various waste flows by 7%–29.3%. Stricter environmental regulation in origin relative to the destination lowers trade costs for certain waste by 7%–77.7%. Per-unit externality costs increase but gains from waste trade decrease with income, with PHE contributing substantially.