The environmental smile curve: input-output evidence on the pollution haven hypothesis

This paper examines how the fragmentation of production across Global Value Chains (GVCs) generates both economic and environmental inequalities. Integrating OECD ICIO and CO2 emission data, our analysis reveals an environmental smile curve, where environmental and economic downgrading co-occur in middle segments of GVCs, reinforcing global inequalities. These disparities intensify with deeper GVC penetration, challenging the decoupling narrative of green growth. By integrating labour and emission data, we provide novel evidence of how GVCs structurally embed asymmetric power relations between production segments, generating unequal ecological and economic burdens across the globe. While the Global North has strategically benefited from GVCs, the Global South has experienced the heightening of its peripheral and subordinated position.