Economic Competitiveness and Environmental Policy: An Application of the Heckscher-Ohlin-Vanek (HOV) Model

The relationship between trade liberalisation and the environment has been the subject of a growing body of literature in recent years. As can be seen from the differing assessment of instrument types for environmental protection, one of the important factors for the relationship between environmental protection and economic competitiveness are regulatory stringency and efficiency. This concerns e.g. performance versus ambient standards, sale technology versus clean technology/clean production, process change versus demand side measures, legislation versus economic instruments. The model based on the Heckscher-Ohlin-Vanek (HOV) model and I focus on the issue of whether environmental regulations influence patterns of the nine Mediterranean developed countries region’s international trade over 2000–2013. The results indicate that more environmental policy stringency in the region decrease net exports.