IDEAS home Printed from https://ideas.repec.org/a/tpr/restat/v87y2005i1p85-91.html
   My bibliography  Save this article

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

Author

Listed:
  • Jeffrey A. Frankel

    (Kennedy School of Government, Harvard University)

  • Andrew K. Rose

    (Haas School of Business, University of California, Berkeley)

Abstract

We seek to contribute to the debate over globalization and the environment by asking: What is the effect of trade on a country's environment, for a given level of GDP? We take specific account of the endogeneity of trade, using exogenous geographic determinants of trade as instrumental variables. We find that trade tends to reduce three measures of air pollution. Statistical significance is high for concentrations of SO 2 , moderate for NO 2 , and lacking for particulate matter. Although results for other environmental measures are not as encouraging, there is little evidence that trade has a detrimental effect on the environment. © 2005 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Jeffrey A. Frankel & Andrew K. Rose, 2005. "Is Trade Good or Bad for the Environment? Sorting Out the Causality," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 85-91, February.
    • Handle: RePEc:tpr:restat:v:87:y:2005:i:1:p:85-91
    as

    Download full text from publisher

    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/0034653053327577
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. Brian R. Copeland & M. Scott Taylor, 2004. "Trade, Growth, and the Environment," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 7-71, March.
    3. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 83-116.
    4. Arik Levinson, 1999. "State Taxes and Interstate Hazardous Waste Shipments," American Economic Review, American Economic Association, vol. 89(3), pages 666-677, June.
    5. Daniel C. Esty & Andre Dua, 1997. "Sustaining the Asia Pacific Miracle: Environmental Protection and Economic Integration," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 37, April.
    6. Dean, Judith M., 1992. "Trade and the environment : a survey of the literature," Policy Research Working Paper Series 966, The World Bank.
    7. 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.
    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. Irwin, Douglas A. & Tervio, Marko, 2002. "Does trade raise income?: Evidence from the twentieth century," Journal of International Economics, Elsevier, vol. 58(1), pages 1-18, October.
    10. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 407-443.
    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, 2008. "Unmasking The Pollution Haven Effect," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 223-254, February.
    13. Javorcik Beata Smarzynska & Wei Shang-Jin, 2003. "Pollution Havens and Foreign Direct Investment: Dirty Secret or Popular Myth?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(2), pages 1-34, December.
    14. Brian R. Copeland & M. Scott Taylor, 1994. "North-South Trade and the Environment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(3), pages 755-787.
    15. 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.
    16. Bradford David F. & Fender Rebecca A & Shore Stephen H. & Wagner Martin, 2005. "The Environmental Kuznets Curve: Exploring a Fresh Specification," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-28, June.
    17. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    18. Grossman, G.M & Krueger, A.B., 1991. "Environmental Impacts of a North American Free Trade Agreement," Papers 158, Princeton, Woodrow Wilson School - Public and International Affairs.
    19. Daniel C. Esty, 2001. "Bridging the Trade-Environment Divide," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 113-130, Summer.
    20. Francisco Rodríguez & Dani Rodrik, 2001. "Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 261-338, National Bureau of Economic Research, Inc.
    21. Ruggie, John Gerard, 1982. "International regimes, transactions, and change: embedded liberalism in the postwar economic order," International Organization, Cambridge University Press, vol. 36(2), pages 379-415, April.
    22. 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.
    23. 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.
    24. 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.
    25. M. Scott Taylor & Brian R. Copeland, "undated". "International Trade and the Environment: A Framework for Analysis," Working Papers 2014-71, Department of Economics, University of Calgary, revised 29 Sep 2014.
    26. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
    27. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    28. Gene M. Grossman & Alan B. Krueger, 1995. "Economic Growth and the Environment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(2), pages 353-377.
    29. Jeffrey Frankel & Andrew Rose, 2002. "An Estimate of the Effect of Common Currencies on Trade and Income," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 437-466.
    30. Eskeland, Gunnar S. & Harrison, Ann E., 2003. "Moving to greener pastures? Multinationals and the pollution haven hypothesis," Journal of Development Economics, Elsevier, vol. 70(1), pages 1-23, February.
    31. 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.
    32. 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.
    33. Liddle, Brantley, 2001. "Free trade and the environment-development system," Ecological Economics, Elsevier, vol. 39(1), pages 21-36, October.
    34. Arrow, Kenneth & Bolin, Bert & Costanza, Robert & Dasgupta, Partha & Folke, Carl & Holling, C.S. & Jansson, Bengt-Owe & Levin, Simon & Mäler, Karl-Göran & Perrings, Charles & Pimentel, David, 1996. "Economic growth, carrying capacity, and the environment," Environment and Development Economics, Cambridge University Press, vol. 1(1), pages 104-110, February.
    35. 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.
    36. Muradian, Roldan & O'Connor, Martin & Martinez-Alier, Joan, 2002. "Embodied pollution in trade: estimating the 'environmental load displacement' of industrialised countries," Ecological Economics, Elsevier, vol. 41(1), pages 51-67, April.
    37. Dani Rodrik, 1994. "Getting Interventions Right: How South Korea and Taiwan Grew Rich," NBER Working Papers 4964, National Bureau of Economic Research, Inc.
    38. Costanza, Robert, 1995. "Economic growth, carrying capacity, and the environment," Ecological Economics, Elsevier, vol. 15(2), pages 89-90, November.
    39. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-963, September.
    40. Revesz, Richard L. & Stavins, Robert N., 2007. "Environmental Law," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 1, chapter 8, pages 499-589, Elsevier.
    41. Shafik, Nemat, 1994. "Economic Development and Environmental Quality: An Econometric Analysis," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 757-773, Supplemen.
    42. Cropper, Maureen & Griffiths, Charles, 1994. "The Interaction of Population Growth and Environmental Quality," American Economic Review, American Economic Association, vol. 84(2), pages 250-254, May.
    43. Barrett, Scott & Graddy, Kathryn, 2000. "Freedom, growth, and the environment," Environment and Development Economics, Cambridge University Press, vol. 5(4), pages 433-456, October.
    44. 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.
    45. Elhanan Helpman, 1988. "Growth, Technological Progress, and Trade," NBER Working Papers 2592, National Bureau of Economic Research, Inc.
    46. Brian R. Copeland & M. Scott Taylor, 1995. "Trade and the Environment: A Partial Synthesis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(3), pages 765-771.
    47. Jeffrey A. Frankel, 2003. "The Environment and Globalization," NBER Working Papers 10090, National Bureau of Economic Research, Inc.
    48. 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jeffrey A. Frankel, 2003. "The Environment and Globalization," NBER Working Papers 10090, National Bureau of Economic Research, Inc.
    2. Dinda, Soumyananda, 2004. "Environmental Kuznets Curve Hypothesis: A Survey," Ecological Economics, Elsevier, vol. 49(4), pages 431-455, August.
    3. Frankel, Jeffrey, 2008. "Global Environmental Policy and Global Trade Policy," Working Paper Series rwp08-058, Harvard University, John F. Kennedy School of Government.
    4. Frankel, Jeffrey A., 2009. "Environmental Effects of International Trade," Scholarly Articles 4481652, Harvard Kennedy School of Government.
    5. Richard T. Carson, 2010. "The Environmental Kuznets Curve: Seeking Empirical Regularity and Theoretical Structure," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 4(1), pages 3-23, Winter.
    6. Brian R. Copeland & M. Scott Taylor, 2004. "Trade, Growth, and the Environment," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 7-71, March.
    7. Carson, Richard T, 2009. "Searching for Empirical Regularity and Theoretical Structure: The Environmental Kuznets Curve," University of California at San Diego, Economics Working Paper Series qt4m6263c2, Department of Economics, UC San Diego.
    8. Jie He, 2007. "Is the Environmental Kuznets Curve hypothesis valid for developing countries? A survey," Cahiers de recherche 07-03, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    9. Stern, David I., 2004. "The Rise and Fall of the Environmental Kuznets Curve," World Development, Elsevier, vol. 32(8), pages 1419-1439, August.
    10. Jevan M. Cherniwchan & M. Scott Taylor, 2022. "International Trade and the Environment: Three Remaining Empirical Challenges," NBER Working Papers 30020, National Bureau of Economic Research, Inc.
    11. Stern, David I., 2014. "The Environmental Kuznets Curve: A Primer," Working Papers 249424, Australian National University, Centre for Climate Economics & Policy.
    12. Bradford David F. & Fender Rebecca A & Shore Stephen H. & Wagner Martin, 2005. "The Environmental Kuznets Curve: Exploring a Fresh Specification," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-28, June.
    13. David I. Stern, 2017. "The environmental Kuznets curve after 25 years," Journal of Bioeconomics, Springer, vol. 19(1), pages 7-28, April.
    14. Roxana Pincheira & Felipe Zuniga, 2021. "Environmental Kuznets curve bibliographic map: a systematic literature review," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 1931-1956, April.
    15. Rothman, Dale S., 1998. "Environmental Kuznets curves--real progress or passing the buck?: A case for consumption-based approaches," Ecological Economics, Elsevier, vol. 25(2), pages 177-194, May.
    16. Valeria Costantini & Chiara Martini, 2010. "A Modified Environmental Kuznets Curve for sustainable development assessment using panel data," International Journal of Global Environmental Issues, Inderscience Enterprises Ltd, vol. 10(1/2), pages 84-122.
    17. Managi, Shunsuke, 2006. "Are there increasing returns to pollution abatement? Empirical analytics of the Environmental Kuznets Curve in pesticides," Ecological Economics, Elsevier, vol. 58(3), pages 617-636, June.
    18. Theodore Panayotou, 2000. "Economic Growth and the Environment," CID Working Papers 56A, Center for International Development at Harvard University.
    19. Tiba, Sofien & Frikha, Mohamed, 2019. "The controversy of the resource curse and the environment in the SDGs background: The African context," Resources Policy, Elsevier, vol. 62(C), pages 437-452.
    20. Pandelis Mitsis, 2012. "Is there an Environmental Kuznets Curve in the Carbon Dioxide Emissions?," University of Cyprus Working Papers in Economics 16-2012, University of Cyprus Department of Economics.

    More about this item

    JEL classification:

    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • F1 - International Economics - - Trade

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:87:y:2005:i:1:p:85-91. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kelly McDougall (email available below). General contact details of provider: https://direct.mit.edu/journals .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.