Sunday, October 18, 2009

Does trade openness improve environmental quality?

A perfect "globalisation and the environment" paper that I need to read. Another one on the ever growing list.

The results appear plausible and the methods appropriate.

Does trade openness improve environmental quality?

Shunsuke Managia, Akira Hibikic and Tetsuya Tsurumia

Received 8 February 2008.
Available online 26 June 2009.


The literature on trade openness, economic development, and the environment is largely inconclusive about the environmental consequences of trade. This study treats trade and income as endogenous and estimates the overall impact of trade openness on environmental quality using the instrumental variables technique. We find that whether or not trade has a beneficial effect on the environment varies depending on the pollutant and the country. Trade is found to benefit the environment in OECD countries. It has detrimental effects, however, on sulfur dioxide (SO2) and carbon dioxide (CO2) emissions in non-OECD countries, although it does lower biochemical oxygen demand (BOD) emissions in these countries. We also find the impact is large in the long term, after the dynamic adjustment process, although it is small in the short term.

Keywords: Trade openness; Composition effect; Scale effect; Technique effect; Environment; Comparative advantage; Environmental regulations effect

JEL classification codes: F18; O13; L60; L50

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