THE POLLUTION HAVEN HYPOTHESIS: EVIDENCE FROM ASEAN COUNTRIES

Abstract

The production of goods and services in economy may create pollution that affects our environment. The pollution haven hypothesis described the situation where developed countries relocate their dirty production to countries with less stringent environmental regulations. This paper contributes to the empirical literature on the effects of the volume of exports and imports of dirty goods on environmental regulation. The study focuses on dirty industries in the Association of South East Asian Nations (ASEAN). Panel data from the years 2002 to 2017 is analysed using the Environmental Kuznets Curve (EKC’s) framework. Our findings show that there is a negative relationship between environmental regulation and volume of exports, and a positive relationship between environmental regulation and the volume of imports. There is no evidence to suggest that the pollution haven hypothesis is valid for ASEAN countries for the relationship between the volumes of import and environmental regulation, meanwhile a negative relationship between the volumes of exports and environmental regulation is consistent with the existence of the pollution haven hypothesis in ASEAN countries.