Advanced Search
MyIDEAS: Login

Is Trade Good or Bad for the Environment? Sorting Out the Causality

Contents:

Author Info

  • Jeffrey A. Frankel
  • Andrew K. Rose

Abstract

What is the effect of trade on a country's environment, for a given level of GDP? Some have observed an apparent positive correlation between openness to trade and measures of environmental quality. But this could be due to endogeneity of trade, rather than causality. This paper uses exogenous determinants of trade geographical variables from the gravity model as instruments to isolate the effect of openness. The finding is that trade may indeed have a beneficial effect on three measures of air pollution. Statistical significance is lacking for Particulate Matter, but is moderate for NO2, and high for SO2. Results for broader environmental measures are not as encouraging, but one can at least say that there is little evidence that trade has the detrimental effect on the environment that the race-to-the-bottom theory would lead one to expect. The larger effect appears to come via income itself: our results generally support the environmental Kuznets curve, which says that growth harms the environment at low levels of income and helps at high levels, and to support the proposition that openness to trade accelerates the growth process.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w9201.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9201.

as in new window
Length:
Date of creation: Sep 2002
Date of revision:
Handle: RePEc:nbr:nberwo:9201

Note: ED ITI
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  2. Arik Levinson, 1999. "State Taxes and Interstate Hazardous Waste Shipments," American Economic Review, American Economic Association, vol. 89(3), pages 666-677, June.
  3. Dean, Judith M., 1992. "Trade and the environment : a survey of the literature," Policy Research Working Paper Series 966, The World Bank.
  4. Copeland, Brian R & Taylor, M Scott, 1994. "North-South Trade and the Environment," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 755-87, August.
  5. William T. Harbaugh & Arik Levinson & David Molloy Wilson, 2002. "Reexamining The Empirical Evidence For An Environmental Kuznets Curve," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 541-551, August.
  6. Shubham Chaudhuri & Alexander S.P. Pfaff, 2002. "Economic growth and the environment: What can we learn from household data?," Discussion Papers 0102-51, Columbia University, Department of Economics.
  7. Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: a Skeptic's Guide to the Cross-National Evidence," Working Papers 9912, Economic Research Forum, revised Apr 1999.
  8. 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.
  9. Douglas A. Irwin & Marko Tervio, 2000. "Does Trade Raise Income? Evidence from the Twentieth Century," NBER Working Papers 7745, National Bureau of Economic Research, Inc.
  10. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
  11. Andreoni, James & Levinson, Arik, 2001. "The simple analytics of the environmental Kuznets curve," Journal of Public Economics, Elsevier, vol. 80(2), pages 269-286, May.
  12. Arik Levinson & M. Scott Taylor, 2004. "Unmasking the Pollution Haven Effect," NBER Working Papers 10629, National Bureau of Economic Research, Inc.
  13. Smarzynska, Beata K., 2001. "Pollution havens and foreign direct investment : dirty secret or popular myth?," Policy Research Working Paper Series 2673, The World Bank.
  14. 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.
  15. David Bradford & Rebecca Schlieckert & Stephen H. Shore, 2000. "The Environmental Kuznets Curve: Exploring a Fresh Specification," CESifo Working Paper Series 367, CESifo Group Munich.
  16. 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.
  17. Grossman, Gene & Krueger, Alan B, 1992. "Environmental Impacts of a North American Free Trade Agreement," CEPR Discussion Papers 644, C.E.P.R. Discussion Papers.
  18. Ruggie, John Gerard, 1982. "International regimes, transactions, and change: embedded liberalism in the postwar economic order," International Organization, Cambridge University Press, vol. 36(02), pages 379-415, March.
  19. 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.
  20. Harrison, Ann, 1996. "Openness and growth: A time-series, cross-country analysis for developing countries," Journal of Development Economics, Elsevier, vol. 48(2), pages 419-447, March.
  21. Adam B. Jaffe et al., 1995. "Environmental Regulation and the Competitiveness of U.S. Manufacturing: What Does the Evidence Tell Us?," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 132-163, March.
  22. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
  23. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  24. Gunnar A. Eskeland & Ann E. Harrison, 2002. "Moving to Greener Pastures? Multinationals and the Pollution Haven Hypothesis," NBER Working Papers 8888, National Bureau of Economic Research, Inc.
  25. Wolfgang Keller & Arik Levinson, 2000. "Environmental Regulations and FDI Inflows to U.S. States," Working Papers gueconwpa~00-00-06, Georgetown University, Department of Economics.
  26. Stokey, Nancy L, 1998. "Are There Limits to Growth?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 1-31, February.
  27. Liddle, Brantley, 2001. "Free trade and the environment-development system," Ecological Economics, Elsevier, vol. 39(1), pages 21-36, October.
  28. Brian R. Copeland & M. Scott Taylor, 2001. "International Trade and the Environment: A Framework for Analysis," NBER Working Papers 8540, National Bureau of Economic Research, Inc.
  29. Arrow, Kenneth & Bolin, Bert & Costanza, Robert & Dasgupta, Partha & Folke, Carl & Holling, C. S. & Jansson, Bengt-Owe & Levin, Simon & Maler, Karl-Goran & Perrings, Charles & Pimentel, David, 1995. "Economic growth, carrying capacity, and the environment," Ecological Economics, Elsevier, vol. 15(2), pages 91-95, November.
  30. Mark Bils & Peter J. Klenow, 1998. "Does Schooling Cause Growth or the Other Way Around?," NBER Working Papers 6393, National Bureau of Economic Research, Inc.
  31. Frankel, Jeffrey & Rose, Andrew K., 2001. "An Estimate of the Effect of Common Currencies on Trade and Income," Working Paper Series rwp01-013, Harvard University, John F. Kennedy School of Government.
  32. Dani Rodrik, 1994. "Getting Interventions Right: How South Korea and Taiwan Grew Rich," NBER Working Papers 4964, National Bureau of Economic Research, Inc.
  33. Costanza, Robert, 1995. "Economic growth, carrying capacity, and the environment," Ecological Economics, Elsevier, vol. 15(2), pages 89-90, November.
  34. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
  35. Revesz, Richard L. & Stavins, Robert N., 2007. "Environmental Law," Handbook of Law and Economics, Elsevier.
  36. Shafik, Nemat, 1994. "Economic Development and Environmental Quality: An Econometric Analysis," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 757-73, Supplemen.
  37. Cropper, Maureen & Griffiths, Charles, 1994. "The Interaction of Population Growth and Environmental Quality," American Economic Review, American Economic Association, vol. 84(2), pages 250-54, May.
  38. Barrett, Scott & Graddy, Kathryn, 2000. "Freedom, growth, and the environment," Environment and Development Economics, Cambridge University Press, vol. 5(04), pages 433-456, October.
  39. Hilton, F. G. Hank & Levinson, Arik, 1998. "Factoring the Environmental Kuznets Curve: Evidence from Automotive Lead Emissions," Journal of Environmental Economics and Management, Elsevier, vol. 35(2), pages 126-141, March.
  40. Selden Thomas M. & Song Daqing, 1995. "Neoclassical Growth, the J Curve for Abatement, and the Inverted U Curve for Pollution," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 162-168, September.
  41. Judith M. Dean, 2002. "Does trade liberalization harm the environment? A new test," Canadian Journal of Economics, Canadian Economics Association, vol. 35(4), pages 819-842, November.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Savonarola vs Paperoga: decrescita e endogenità delle aree valutarie ottimali
    by Alberto Bagnai in Goofynomics on 2011-12-31 17:42:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:9201

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.