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- Assessing the welfare impacts of international trade certainly is a fascinating task; however, harnessing the complexity of the task is far beyond my own capacity. Nevertheless, it is my intention to narrow the focus on a specific feature underlying some of the new patterns of trade, namely the pollution haven hypothesis. The intuition behind this hypothesis is very simple: given the different levels in the stringency of environmental regulations between countries, trade liberalization might lead to a specialization in pollution-intensive products in the country with the most lax environmental regulations. In other words, those countries specialize in dirty products because they have a comparative advantage in producing them. Alternatively, countries with more stringent environmental standards will specialize in clean products since they face higher pollution costs. Trade liberalization is the binding ingredient necessary for those specializations to happen.