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Although the race-to-the-bottom scenario sounds plausible, it does not appear to describe reality. In fact, the financial incentive for firms to shift production to poor countries to take advantage of their weaker environmental rules does not seem especially powerful. When firms decide where to locate a new factory, they look at many different factors: the costs of labor and financial capital; whether the location is close to a reliable suppliers of the inputs that they need; whether the location is close to customers; the quality of transportation, communications, and electrical power networks; the level of taxes; and the competence and honesty of the local government. The cost of environmental regulations is a factor, too, but typically environmental costs are no more than 1 to 2% of the costs faced by a large industrial plant. The other factors that determine location are much more important to these companies than trying to skimp on environmental protection costs.

When an international company does choose to build a plant in a low-income country with lax environmental laws, it typically builds a plant similar to those that it operates in high-income countries with stricter environmental standards. Part of the reason for this decision is that designing an industrial plant is a complex and costly task, and so if a plant works well in a high-income country, companies prefer to use the same design everywhere. Also, companies realize that if they create an environmental disaster in a low-income country, it is likely to cost them a substantial amount of money in paying for damages, lost trust, and reduced sales—by building up-to-date plants everywhere they minimize such risks. As a result of these factors, foreign-owned plants in low-income countries often have a better record of compliance with environmental laws than do locally-owned plants.

Pressuring Low-Income Countries for Higher Environmental Standards

In some cases, the issue is not so much whether globalization will pressure low-income countries to reduce their environmental standards, but instead whether the threat of blocking international trade can pressure these countries into adopting stronger standards. For example, restrictions on ivory imports in high-income countries, along with stronger government efforts to catch elephant poachers, have been credited with helping to reduce the illegal poaching of elephants in certain African countries.

However, it would be highly undemocratic for the well-fed citizens of high-income countries to attempt to dictate to the ill-fed citizens of low-income countries what domestic policies and priorities they must adopt, or how they should balance environmental goals against other priorities for their citizens. Furthermore, if high-income countries want stronger environmental standards in low-income countries, they have many options other than the threat of protectionism. For example, high-income countries could pay for anti-pollution equipment in low-income countries, or could help to pay for national parks. High-income countries could help pay for and carry out the scientific and economic studies that would help environmentalists in low-income countries to make a more persuasive case for the economic benefits of protecting the environment.

Questions & Answers

What is an axiom in economics
Akerivaan Reply
And it examples
Why is normal indifference curve convex to the origin? In which way does this convexity affect the marginal rate of substitution?
Alwyn Reply
What is Budget constraint
Veena Reply
Budget constraints is when government expenditure is greater than government revenue or when revenue is less than expenditure.
join you to microeconomic
what is the deferent between quantity demand and quantity demanded
what will happen to the budget constraints if the consumer income decline?
Maryam Reply
please what is the relationship between microeconomics and macroeconomics?
Accordingly, Microeconomics focuses on the drivers of decision making, as well as the ways in which individuals' decisions affect the overall supply and demand and supply of particular goods and services, in an economy, and in turn their prices. Whereas Macroeconomics is the study of the big picture
Of the economy (retrieved from Google)
when consumer's income decline then purchasing power of consumer decreases .Budget line shifts inward.
what is a deductive reasoning
tobi Reply
Deductive reasoning makes use of to arrive at the conclusion.That is, the premise must be real and put to rest .
Deductive statement makes use of facts to arrive at the conclusion.That is ,the premise must be real and put to rest in order to produce the required results.
what is scarcity
scarcity is as a result of miss management and poor allocation of resources.
what is monopoly in economics
price change in case of an inferior good
divya Reply
Search on Google
the purchase of an inferior good decreases with increase in income and vice versa
what is frontier
Ebrima Reply
I want the answers
What is the difference between microeconomics and macroeconomics?
Krysstel Reply
what is demand
Chidex Reply
demand Is the quantity of goods a consumer is willing and able to produce at a given price and at a particular period of time.
fixed and variable factors of production
muqtaar Reply
James' income declines, and as a result, he buys more spinach. Is spinach an inferior or a normal good? What happens to James' demand curve for spinach?
Alwyn Reply
When the price floor is implemented, the equilibrium quantity will decrease. Is it true or wrong?
naim Reply
it's true
what is elasticity
Chibuzor Reply
calculate the price elasticity of demand for Mr chibuzor (y) using both arc and price elasticity formulae
The best way to understand elasticity is just looking to your behavior as a consumer. Just think about the basic need like food. We all know without, one end up dying if could not eat for a couple of days. It is a reason we say the demand is inelastic. It's impossible to survive without food.
On the other hand, the demand for luxury goods is elastic because it's sensitive to price changes as it is possible to survive without such good like expensive car. We say demand for such goods is elastic because as consumers, we have an option of not buying as it's possible to survive without them.
pls how do u calculate for the opportunity cost of two commodities when giving two commodities in question, and one is measured in tons and the other is measured in units
DBA Reply
what are tge factors that causes change in demand
emy Reply
change in income change in price change in taste and preference
Change in price, ,availability of substitutes ,change in consumer preferences, changes in economic situation.
Qd=f(Y, P ,Ps ,F, T ,W , Pop)
substitute goods taste preference income
income increase and decrease is the most important reason of demand changing
Price variable : price This leads to a same direction change for certain luxury goods, and to an opposite direction change for the ordinary, normal, inferior... that's the remaining types of goods. As a result, the is a movement along the demand curve. We also have non price variables like income,
We also have non price variables like income, that increases the willingness to pay of the consumers and thus increase the demande at any price, leading to a shift of the demand curve to the right if income increases or to the left of income decreases. A change in income also leads to
A same direction change in demand for the normal good and for the opposite direction change for inferior goods.
We also have other non price variables like taste, time horizon,...

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Source:  OpenStax, Microeconomics. OpenStax CNX. Aug 03, 2014 Download for free at http://legacy.cnx.org/content/col11627/1.10
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