Trade Competition, Domestic Political Constraints, and Pollution

This paper examines conditions under which domestic political institutions mediate the effect of trade competition on regulatory races in the environmental area. We focus on the role of domestic veto players in shaping governments' policy responses to trade competition which are reflected eventually in air (Sulphur dioxide, SO2) and water pollution (Biochemical Oxygen Demand, BOD) intensity levels. Our analysis of 140 countries for the period 1980-2003 suggests that countries’ air and water pollution intensity levels respond to pressures from trade competitors when political constraints faced by governments are low. As the number of veto players and their ideological heterogeneity increase, domestic pollution intensity levels become less responsive to the competitive pressure from trade. Importantly, in relation to water pollution, the constraining effect of veto players is more pronounced for air pollution -visible pollution issue around which organized, urban constituencies tend to mobilize.