Results are only significant when total pollution is taken into account. Other types of pollutants do not seem affected by the treat. Coefficients remain significant even after controlling for production factor shares, which indicates that the dynamics of dirty industries go beyond traditional comparative advantages. Results for exports follow a similar path. Dirty industry exports are expanding relative to other industries before the agreement, but this trend disappears after the beginning of negotiations. The main difference regarding the composition of exports is the fact that, after crossing the DR-CAFTA dummy with the indicators of factor shares, trends in dirty industry exports become insignificant.

|**Table 1: Regression Ana**<br>**Dependent variable:**<br>ann|**lysis: CA4**<br>ual output grow|th per 2-d|igit indu|stry||an|nual exports growt|h per 2-|digit indu|stry||
|---|---|---|---|---|---|---|---|---|---|---|---|
|(1)<br>(2)|(3)<br>(4)|(5)|(6)|(7)|(8)|(1)<br>(2)|(3)<br>(4)|(5)|(6)|(7)|(8)|
|Dirty Total<br>0.16|0.33**|0.35**||0.38**||0.81*|1.74**|1.67*||1.34||
|Dirty Air<br>0.11|0.28||0.30||0.30|0.79|17.04*||1.86||1.71|
|Dirty Water<br>0.07|0.17||0.17||0.17|0.42|9.91||0.85||0.46|
|Dirty Metal<br>-0.08|-0.21||-0.24||-0.25|-0.75|-14.34**||-2.11**||-2.57**|
|After*Dirty Total|-0.34*|-0.35*||-0.41*|||-1.75**|-1.93*||-1.30||
|After*Dirty Air|-0.31||-0.33||-0.33||-17.30||-1.95||-1.67|
|After*Dirty Water|-0.18||-0.19||-0.19||-10.71||-1.14||-0.39|
|After*Dirty Metal|0.24||0.25||0.26||13.00||1.45||2.31|
|Labor share||-0.09|-0.19|-0.14|-0.24|||-1.62|-2.72|-2.00|-3.23|
|Capital share||0.14|0.09|0.11|0.10|||-1.23|-1.69|-0.88|-1.00|
|After*Labor||||0.10|0.10|||||0.64|0.80|
|After*Capital||||0.06|-0.01|||||-0.70|-1.41|
|N<br>168<br>168|168<br>168|168|168|169|170|168<br>168|168<br>168|147|147|147|147|
|Country fix<br>y<br>y<br>*,** signinficant at 10% and<br>Note: the classification int|y<br>y<br>5% resp.<br>o dirty industries|y<br>follows M|y<br>ani et.|y<br>al (1998)|y|y<br>y|y<br>y|y|y|y|y|

The results of the regression analysis for individual countries are presented in ~~<u>tT</u>~~ <u>able 2. We focus here on</u> the analysis of total emissions. The results for other types of pollutants are presented in ~~the appendixA~~ <u>nnex</u> 2. Results for Costa Rica indicate higher growth of output for dirty industries before the agreement, but this trend is partially canceled after negotiations. As for Costa Rica’s exports, dirty industries expand faster during the whole period. Regressions for El Salvador indicate no significant effects of the agreement on the composition of output toward dirty industries. Growth seems to be driven mainly by factor shares, with human capital-intensive industries expanding relatively faster. El Salvador’s exports behave similarly to exports for the region, that is, the relatively higher growth of exports in dirty industries slows significantly after the agreement takes place. In Nicaragua, the agreement seems to have no impact on relatively pollution-intensive industries. During the sample period, growth favors laborintensive manufacturing activities. Finally, in Honduras, the agreement seems to have contributed to the relative growth in the output of cleaner industries. This result remains significant even after controlling for factor shares of production. Once more, results go against the common assumptions in the policy debate.

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