Testing the Pollution Haven hypothesis : an analysis of the deviations in Wisconsin's regulatory and industrial behavior as a quantified measure of environmental stringency

Abstract

This thesis investigates the degradation of Wisconsin-s environmental stringency to identify regulatory failures and noncompliant behavioral trends in pollution-intensive industries in response to the 2008 economic recession. Wisconsin was selected due the recent proliferation of industrial sand mining and concentrated animal feeding operations, which have compromised the state's long standing reputation for environmental prowess. The Pollution Haven Hypothesis argues that pollutionintensive industries and investments emigrate from countries with strict environmental policies to countries with fewer or permissive ones. Moreover, it provides a means of understanding how national and sub-national governments can manipulate environmental regulations to obtain a comparative advantage and foster economic growth. The research methodology for this paper is divided into a four-tier test that measures stringency using the following environmental indicators: pre-existing environmental indexes; industrially adjusted pollution abatement costs from manufacturers; state legislation and activities performed by the regulatory agency; and economic growth in pollution-rich industries relative to noncompliant behavior. The findings demonstrate that Wisconsin-s environmental degradation has resulted in endogenous economic growth in industrial sand mining and concentrated animal feeding operations. Furthermore, the findings highlight a regressive transition in Wisconsin's overall level of environmental stringency, which, in end effect, has fostered the necessary preconditions for a new pollution haven.