ERSs and Trade in Natural Resources: The Impact on Economic Growth and Poverty in LDCs

We study the impact on economic growth of LDCs of environmentally related standards (ERSs) adopted by such economies to bypass non-tariff-measures (NTMs) imposed as environmental regulatory requirements on their exports of natural resources to developed importing countries. In particular, we develop an empirical growth model that incorporates the impacts of resource abundance and of ERSs, the latter being measured by the number of ISO14001 certificates which a LDC holds, on per capita GDP growth. This specification allows to test for the existence of the 'resource curse' and for the effects of ERSs on growth through their interaction with the resource abundance measure. Our results suggest that ERSs can be growth promoting and in certain cases a factor mitigating the 'resource curse' in LDCs. Thus, compliance with ERSs combined with aid in institution formation or technology transfers can allow LDCs to enhance economic growth and alleviate poverty.