Internal Trade and Environmental Policy Effectiveness in Developing Countries : A Binary Endogenous Growth Model with Regional Heterogeneity

The majority of environmental pollution has progressively shifted from developed to developing countries due to the globalization of labor and trade. In contrast to developed nations, many developing nations confront more significant regional disparities in social development in the context of environmental governance. Consequently, this paper builds a binary endogenous model to analyze the impact of environmental policies on developing nations with substantial regional differences. The binary model is able to more accurately simulate the impact of environmental policy implementation in actual developing countries, revealing that the 'pollution haven ' effect includes not only the transfer of polluting industries to less developed regions but also that inter-regional trade leads to the dumping of products produced using polluting production methods from less developed to developed regions, which hurts environmental regulation. effects detrimental to environmental policy. The model's findings are also compared to China's national environmental protection policy, which has been progressively intensifying since 2000. Environmental degradation has a significant spatial spillover effect, and this effect is positively correlated with the volume of internal trade. The findings of this paper provide a new analytical framework for the subsequent evaluation of the effectiveness of environmental policy implementation in developing countries and offer policy implementation tools for environmental policy in developing regions to improve the efficacy of environmental regulatory policies by limiting internal trade in polluting goods in addition to environmental taxes and subsidies