|**Table 2: Country**<br>**CRI**|**Regres**|**sions**||||||**HND**||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|**Dependent variabl**|**e:**|||||||**Dependent variabl**|**e:**|||||||
|(1)<br>outpu|(2)<br>t growth|(3)<br>per 2-di|(4)<br>git ind|(1)<br>export|(2)<br>s growth|(3)<br>per 2-dig|(4)<br>it ind|(1)<br>outpu|(2)<br>t growth|(3)<br>per 2-di|(4)<br>git ind|(1)<br>exp|(2)<br>orts grow|(3)<br>th per 2-|(4)<br>digit ind|
|Dirty Total 0.64|0.34**|1.21**|1.23*|0.33**|0.51**|0.53**|0.62**|Dirty Tota<br>0.07|0.17*|0.08|1.08|-0.759|-1.005|-0.842|-1.40|
|After*Dirty Total|-0.34*|-1.13*|-1.10||-0.31|-0.31|-0.47|After*Dirty Total|-0.17*|-0.17*|-0.17*||0.492|0.49|1.60|
|Labor share||-1.96|-1.72|||-3.26*|-3.17|Labor share||-3.26|1.08|||-8.41*|-9.33*|
|Capital share||-1.62|-1.02|||-2.86*|-2.96|Capital share||-3.83*|-4.04*|||-4.35|-4.27|
|After*Labor|||0.33||||-0.2|After*Labor|||-7.07**||||7.8|
|After*Capital|||||||-0.22|After*Capital|||0.17*||||-1.59|
|N<br>168|168|168|168|168|168|168|168|N<br>168|168|168|168|168|168|168|168|
|**NIC**||||||||**SVL**||||||||
|**Dependent variabl**|**e:**|||||||**Dependent variabl**|**e:**|||||||
|(1)<br>outpu|(2)<br>t growth|(3)<br>per 2-di|(4)<br>git ind|(1)<br>export|(2)<br>s growth|(3)<br>per 2-dig|(4)<br>it ind|(1)<br>outpu|(2)<br>t growth|(3)<br>per 2-di|(4)<br>git ind|(1)<br>exp|(2)<br>orts grow|(3)<br>th per 2-|(4)<br>digit ind|
|Dirty Total -0.07|-0.09|-0.05|-0.01|3.14|6.36**|0.07|-0.05|Dirty Tota -0.01|0.00|0.00|0.01|0.31|0.69**|0.69**|0.68*|
|After*Dirty Total|0.03|0.03|-0.04||-6.45*|-0.48|-0.25|After*Dirty Total|-0.02|-0.02|-0.06||-0.69*|-0.69*|-0.68|
|Labor share||0.62*|1.30**|||5.81*|11.32**|Labor share||-16.27*|-16.27*|||3.08|3.08|
|Capital share||0.04|-0.03|||-2.81**|-2.83**|Capital share||-16.23*|-16.32*|||3.07|3.07|
|After*Labor|||-1.22||||-11.02*|After*Labor|||0.02||||1.00|
|After*Capital|||0.13||||0.05|After*Capital|||0.04||||-0.16|
|N<br>168|168|168|168|168|168|168|168|N<br>168|168|168|168|168|168|168|168|
|*,** signinficant at<br>Note: the classifica|10% and<br>tion into|5% resp<br>dirty in|.<br>dustries|follows||||||||||||

Overall the quantitative exercises developed in this section find no evidence to support the formation of pollution havens after DR-CAFTA negotiation. Annual levels of pollution seem to have increased after the agreement, but changes were driven mainly by the increase in production. In none of the economies analyzed do weak environmental regulatory frameworks seem to have played a major role in determining comparative advantages. Changes in the composition of production are quite small and, in some cases (like Honduras), favor cleaner sectors. Nevertheless, countries should continue pursuing their environmental agenda and working to close regulatory gaps among member countries, as pollution pressures tend to increase as economies grow. The environmental agenda should be combined with action to improve and sustain competitiveness in the presence of higher regulatory costs.

# **VI. CONCLUSIONS**

This paper analyzes the short-term and possible medium-term environmental impacts of the DR-CAFTA. The paper started by reviewing DR-CAFTA’s environmental chapter and environmental regulatory frameworks in member countries. It ~~,~~ then ~~,~~ reviewe ~~<u>ds</u>~~ the literature on Trade and the Environment and discussed ~~s~~ the expected results of the agreement for the region. The paper proposes two empirical exercises for assessing the changes in emissions following the DR-CAFTA negotiations. The first exercise decomposes the pollution effect into scale, composition, and technique effects. The second exercise focuses on changes in the composition of production and exports and assesses whether the 19