Pollution emitted by US manufacturers declined markedly over the past several decades, even as real manufacturing output increased. I first show that most of the decline in US manufacturing pollution has resulted from changing production processes (“technology”), rather than changes in the mix of goods produced. I then show that increased net imports of polluting goods (“international trade”) accounts for only a small portion of the pollution reductions from the changing mix of goods. Together, these two findings demonstrate that shifting polluting industries overseas explains only a minor part—less than 10 percent—of the cleanup of US manufacturing.

This paper estimates the effect of changing environmental standards on patterns of international investment. The analysis advances the existing literature in three ways. First, we avoid comparing different countries by examining foreign direct investment in the United States and differences in pollution abatement costs among U.S. states. Data on environmental costs in U.S. states are more comparable than those for different countries, and U.S. states are more similar in other difficult-to-measure dimensions. Second, we allow for differences in states' industrial compositions, an acknowledged problem for earlier studies. Third, we employ an 18-year panel of relative abatement costs, allowing us to control for unobserved state characteristics. We find robust evidence that abatement costs have had moderate deterrent effects on foreign investment.

Environmental Engel curves (EECs) describe households’ incomes and the pollution necessary to produce the goods and services they consume. We calculate 29 annual EECs from 1984 to 2012 for point-source air pollutants in the United States, revealing three clear results: EECs slope upward, have income elasticities less than 1, and shift down over time. Even without changes to production techniques, pollution would have declined despite growing incomes. This improvement can be attributed about equally to two trends: household income growth represented by movement along inelastic EECs and economy-wide changes represented by downward shifts in EECs over time.

This paper uses an updated and revised panel data set on ambient air pollution in cities worldwide to examine the robustness of the evidence for the existence of an inverted U-shaped relationship between national income and pollution. We test the sensitivity of the pollution-income relationship to functional forms, to additional covariates, and to changes in the nations, cities, and years sampled. We find that the results are highly sensitive to these changes, and conclude that there is little empirical support for an inverted U-shaped relationship between several important air pollutants and national income in these data.

In numerous studies, economists have found little empirical evidence that environmental regulations affect trade flows. In this paper, we propose and test several common explanations for why the effect of environmental regulations on trade may be difficult to detect. We demonstrate that whereas most trade occurs among industrialized economies, environmental regulations have stronger effects on trade between industrialized and developing economies. We find that for most industries, pollution abatement costs are a small component of total costs, and are unrelated to trade flows. In addition, we show that those industries with the largest pollution abatement costs also happen to be the least geographically mobile, or footloose. After accounting for these distinctions, we measure a significant effect of pollution abatement costs on imports from developing countries, and in pollution-intensive, footloose industries.