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Environmental Effects of Commodity Trade vs. Service Trade in Developing Countries

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  • Mohammad Zohaib Saeed

    (School of Accounting, Finance, Economics and Decision Sciences, Western Illinois University, 1 University Circle, Macomb, IL 61455, USA)

  • Shankar Ghimire

    (School of Accounting, Finance, Economics and Decision Sciences, Western Illinois University, 1 University Circle, Macomb, IL 61455, USA)

Abstract

Increasing levels of carbon emissions have been a growing concern worldwide because of their adverse environmental effects. In that context, this paper examines the association between different categories of trade and carbon dioxide emissions. In particular, we analyze whether total trade, commodity trade, and service trade affect the environment differently. The analysis is based on panel data for 147 developing countries for the period from 1960 to 2020. Methodologically, the fixed-effects model, as suggested by the Hausman test, is used to examine the relationships. We present two main conclusions: (1) overall trade increases CO 2 emissions, and (2) commodity trade contributes to higher levels of CO 2 emissions than service trade. These results have important policy implications—climate change policies should target commodity trade sectors to help reduce environmental carbon emissions.

Suggested Citation

  • Mohammad Zohaib Saeed & Shankar Ghimire, 2022. "Environmental Effects of Commodity Trade vs. Service Trade in Developing Countries," Commodities, MDPI, vol. 1(2), pages 1-12, November.
    • Handle: RePEc:gam:jcommo:v:1:y:2022:i:2:p:8-126:d:965381
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    References listed on IDEAS

    as
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    2. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    3. Ali Raza & Hongguang Sui & Kittisak Jermsittiparsert & Wioletta Żukiewicz-Sobczak & Pawel Sobczak, 2021. "Trade Liberalization and Environmental Performance Index: Mediation Role of Climate Change Performance and Greenfield Investment," Sustainability, MDPI, vol. 13(17), pages 1-16, August.
    4. Jussi LANKOSKI, 1997. "Environmental Effects Of Agricultural Trade Liberalization And Domestic Agricultural Policy Reforms," UNCTAD Discussion Papers 126, United Nations Conference on Trade and Development.
    5. Dinda, Soumyananda, 2004. "Environmental Kuznets Curve Hypothesis: A Survey," Ecological Economics, Elsevier, vol. 49(4), pages 431-455, August.
    6. Ian Goldin, 1990. "Comparative Advantage: Theory and Application to Developing Country Agriculture," OECD Development Centre Working Papers 16, OECD Publishing.
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