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Economic Openness, Institution, and Environmental Degradation in a Small Open Dynamic Economy: Recent Evidence from Malaysia

Author

Listed:
  • Chan Fatt Cheah

    (Universiti Putra Malaysia)

  • Abdul Samad Abdul-Rahim

    (Universiti Putra Malaysia)

  • Mohd Yusof Saari

    (Universiti Putra Malaysia)

  • Niaz Ahmad Mohd Naseem

    (Universiti Putra Malaysia)

Abstract

This paper aims to investigate the impact of the economic openness and institutional quality in explaining the environmental degradation in Malaysia that covers from 1980 to 2019. By using an innovative autoregressive distributed lag (ARDL) technique, the result indicates that economic openness that is measured through the trade and FDI are unequivocally environmental improving. Meanwhile, the institutional reforms also appeared to actualize the beneficial effect of environmental emission. The findings show that economic openness and institutional quality act as a key driving force to further curb the CO2 emission and in turn to reduce the environmental pollution. This suggests that countries with adequate trade, FDI, and institutional settings like Malaysia are on the right track to reinforce all efforts in bringing down pollution. Therefore, environmental quality can be improved through the greater ability and willingness to enforce environmental regulations and higher trade liberalization process, which is usually associated with higher income, more economic development, and better environment.

Suggested Citation

  • Chan Fatt Cheah & Abdul Samad Abdul-Rahim & Mohd Yusof Saari & Niaz Ahmad Mohd Naseem, 2023. "Economic Openness, Institution, and Environmental Degradation in a Small Open Dynamic Economy: Recent Evidence from Malaysia," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(3), pages 3276-3289, September.
    • Handle: RePEc:spr:jknowl:v:14:y:2023:i:3:d:10.1007_s13132-022-00974-3
    DOI: 10.1007/s13132-022-00974-3
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    More about this item

    Keywords

    Environmental degradation; Economic openness; FDI; Institutional quality; Malaysia; ARDL;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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