Much economic growth research has been devoted to determining the explanatory variables that explain cross-country variation in growth rates. A frequently cited problem with this literature is that the number of potential growth regressors is vast, potentially exceeding the number of countries available for study. Thus, researchers are faced with the task of arbitrarily specifying which explanatory variables to include in their growth regressions, raising concerns about how confident we can be in their results. These concerns were magnified by the influential paper of Ross Levine and David Renelt (1992), in which they employ a variation of Edward E. Leamer’s (1983) extreme bounds analysis to test the robustness of conventional growth regression coefficients to changes in the set of conditioning variables. They conclude that the results of this literature are extremely fragile, with the only robust determinants of growth being physical capital investment, initial income, and secondary school enrollment. In contrast, they demonstrate the fragility of a host of fiscal, monetary, and trade policy variables, as well as measures of political and economic stability and economic distortions. There have been two main responses to their findings. The pessimistic response has been to conclude, given the lack of a reliable statistical relationship between conventional

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.