Empirical Study of Pollution Haven Hypothesis for India

The objective of this paper is to check whether India can be regarded as pollution haven and we try to answer this question using Input-Output technique. First of all analyzing the determinants of direction of trade, we have discussed the impact of trade regime on pollution level of developed and developing countries. Under proper assumptions, we have calculated the increase and decrease in CO2, SO2 and NOx emissions induced by 1 billion rupees of additional exports and imports respectively. If pollution haven hypothesis is true, then India should loose, in terms of environment, due to this trade expansion. We find that India considerably gains from extra trade and gains have only increased over time, indicating that it has moved further away from being a pollution haven. Then we relax the assumptions and assess the effects accordingly. The outcome is robust to changes in assumptions.