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New Empirical Evidence for the Impact of Trade and Economic Growth on the Environment

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  • Awudu Abdulai
  • Linda Ramcke

Abstract

This paper explores the interrelations between economic growth, international trade and environmental degradation both theoretically and empirically. Panel data from developed and developing countries for the period of 1980 to 2003 is used and previous critique, especially on the econometric specification, is embedded. In particular, it is not assumed that there is a single link for all countries. Several environmental factors and one sustainability indicator are analysed for the full sample, regions and income groups. The results indicate that there is an Environmental Kuznets Curve (EKC) for most pollutants, but with several reservations. None of the various hypotheses that concern the link between trade and environmental degradation can be entirely confirmed. If anything, there is modest support for the Pollution Haven Hypothesis (PHH). In addition, there are signs that trade liberalisation might be beneficial to sustainable development for rich countries, but harmful to poor ones. However, a sustainable development path is particularly important for developing countries, as the poor are most exposed and vulnerable to the health and productivity losses associated with a degraded environment. As developing countries often do not have the means and capacities to set up the appropriate environmental policies, it is on developed countries to take the lead in addressing environmental degradation issues and assisting developing countries.

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Bibliographic Info

Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c013_022.

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Length: 36 Pages
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:deg:conpap:c013_022

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Related research

Keywords: sustainable development; Pollution Haven Hypothesis; Environmental Kuznets Curve;

References

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  1. David I. Stern & Tony Auld & Michael S. Common & Kali K. Sanyal, 1998. "Is there an environmental Kuznets curve for sulfur?," Working Papers in Ecological Economics 9804, Australian National University, Centre for Resource and Environmental Studies, Ecological Economics Program.
  2. Grossman, Gene M & Krueger, Alan B, 1995. "Economic Growth and the Environment," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 353-77, May.
  3. John Hartwick, 1976. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," Working Papers 220, Queen's University, Department of Economics.
  4. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
  5. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  6. Valeria Costantini & Chiara Martini, 2006. "A Modified Environmental Kuznets Curve for Sustainable Development Assessment Using Panel Data," Working Papers 2006.148, Fondazione Eni Enrico Mattei.
  7. Shafik, Nemat, 1994. "Economic Development and Environmental Quality: An Econometric Analysis," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 757-73, Supplemen.
  8. Gale, Lewis R. & Mendez, Jose A., 1998. "The empirical relationship between trade, growth and the environment," International Review of Economics & Finance, Elsevier, vol. 7(1), pages 53-61.
  9. Cole, Matthew A., 2004. "Trade, the pollution haven hypothesis and the environmental Kuznets curve: examining the linkages," Ecological Economics, Elsevier, vol. 48(1), pages 71-81, January.
  10. Brian R. Copeland & M. Scott Taylor, 2003. "Trade, Growth and the Environment," NBER Working Papers 9823, National Bureau of Economic Research, Inc.
  11. Chichilnisky, Graciela, 1994. "North-South Trade and the Global Environment," American Economic Review, American Economic Association, vol. 84(4), pages 851-74, September.
  12. Susmita Dasgupta & Benoit Laplante & Hua Wang & David Wheeler, 2002. "Confronting the Environmental Kuznets Curve," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 147-168, Winter.
  13. Pethig, Rudiger, 1976. "Pollution, welfare, and environmental policy in the theory of Comparative Advantage," Journal of Environmental Economics and Management, Elsevier, vol. 2(3), pages 160-169, February.
  14. Vincent, Jeffrey R., 1997. "Testing for environmental Kuznets curves within a developing country," Environment and Development Economics, Cambridge University Press, vol. 2(04), pages 417-431, November.
  15. Selden Thomas M. & Song Daqing, 1994. "Environmental Quality and Development: Is There a Kuznets Curve for Air Pollution Emissions?," Journal of Environmental Economics and Management, Elsevier, vol. 27(2), pages 147-162, September.
  16. Pearce, David W. & Atkinson, Giles D., 1993. "Capital theory and the measurement of sustainable development: an indicator of "weak" sustainability," Ecological Economics, Elsevier, vol. 8(2), pages 103-108, October.
  17. Castaneda, Beatriz E., 1999. "An index of sustainable economic welfare (ISEW) for Chile," Ecological Economics, Elsevier, vol. 28(2), pages 231-244, February.
  18. Suri, Vivek & Chapman, Duane, 1998. "Economic growth, trade and energy: implications for the environmental Kuznets curve," Ecological Economics, Elsevier, vol. 25(2), pages 195-208, May.
  19. Rauscher, Michael, 1991. "National environmental policies and the effects of economic integration," European Journal of Political Economy, Elsevier, vol. 7(3), pages 313-329, October.
  20. Cole, Matthew A., 2003. "Development, trade, and the environment: how robust is the Environmental Kuznets Curve?," Environment and Development Economics, Cambridge University Press, vol. 8(04), pages 557-580, October.
  21. Werner Antweiler & Brian R. Copeland & M. Scott Taylor, 2001. "Is Free Trade Good for the Environment?," American Economic Review, American Economic Association, vol. 91(4), pages 877-908, September.
  22. Copeland, Brian R & Taylor, M Scott, 1995. "Trade and Transboundary Pollution," American Economic Review, American Economic Association, vol. 85(4), pages 716-37, September.
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