We then expect our interacted quadratic in relative capital to labor to imply a positive impact of further openness for high capital to labor ratios but a negative effect for lower levels. Proposition 2 shows that regardless of a country’s other characteristics if its capital to labor ratio is sufficiently high relative to those of its trading partners then it must export good X. Alternatively, if its capital to labor ratio is relatively low then it must import good X. This partial result reflects the factor endowment hypothesis.
Similarly we expect that our quadratic in relative income per capita to imply a negative impact of further openness on concentrations for high incomes but a positive effect for lower incomes. Proposition 3 indicates that regardless of other country characteristics, if a country’s income per capita is sufficiently high it must import good X. Alternatively if its income per capita is relatively low, it must export good X. This partial result reflects the pollution haven hypothesis.
Since our data are observations of ground level SO2 concentrations at sites in various participating cities around the world it is apparent that site-specific weather and topographical conditions may have a large bearing on concentration levels for any given level of emissions. Unmeasured topographical features are captured in some of our estimations through site-specific fixed and random effects. In earlier research, measured site-specific influences such as proximity to oceans or deserts have sometimes proven useful. payday loans reviews