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The Effects Of Trade Liberalization On The Environment: An Empirical Study


  • McCarney, Geoffrey R.
  • Adamowicz, Wiktor L.


We seek to contribute to the emerging economic theory on trade, the environment and development. Using panel data across countries, econometric models are estimated to predict the effects of openness on organic water pollutant (BOD) and carbon dioxide (CO2) emissions. Results indicate that freer trade significantly increases emissions of both pollutants, thus reducing environmental quality. Moreover, the panel nature of the data allows heterogeneity across countries to be controlled, so that comparisons can be made of how different national characteristics influence the environmental impact of freer trade. By testing the effects of democratic versus autocratic governance, it is found that while greater democracy can induce significant reductions in BOD emissions as openness increases, it may also lead to increased CO2 levels. Meanwhile, by testing for and failing to reject the pollution haven hypothesis, it is suggested that environmental gains from openness in relatively rich countries may be coming at the expense of environmental degradation in poorer countries.

Suggested Citation

  • McCarney, Geoffrey R. & Adamowicz, Wiktor L., 2005. "The Effects Of Trade Liberalization On The Environment: An Empirical Study," Annual Meeting, July 6-8, 2005, San Francisco, CA 34157, Canadian Agricultural Economics Society.
  • Handle: RePEc:ags:caes05:34157

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    References listed on IDEAS

    1. 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.
    2. 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.
    3. Copeland, Brian R. & Taylor, M. Scott, 2005. "Free trade and global warming: a trade theory view of the Kyoto protocol," Journal of Environmental Economics and Management, Elsevier, vol. 49(2), pages 205-234, March.
    4. Hausman, Jerry A & Taylor, William E, 1981. "Panel Data and Unobservable Individual Effects," Econometrica, Econometric Society, vol. 49(6), pages 1377-1398, November.
    5. Damania, Richard & Fredriksson, Per G. & List, John A., 2003. "Trade liberalization, corruption, and environmental policy formation: theory and evidence," Journal of Environmental Economics and Management, Elsevier, vol. 46(3), pages 490-512, November.
    6. Deacon, Robert & Mueller, Bernardo, 2004. "Political Economy and Natural Resource Use," University of California at Santa Barbara, Economics Working Paper Series qt68g1n1v8, Department of Economics, UC Santa Barbara.
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    Cited by:

    1. Shahbaz, Muhammad & Hye, Qazi Muhammad Adnan & Tiwari, Aviral Kumar & Leitão, Nuno Carlos, 2013. "Economic growth, energy consumption, financial development, international trade and CO2 emissions in Indonesia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 25(C), pages 109-121.
    2. Jing Tian & Hua Liao & Ce Wang, 2015. "Spatial–temporal variations of embodied carbon emission in global trade flows: 41 economies and 35 sectors," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 78(2), pages 1125-1144, September.
    3. Shahbaz, Muhammad & Lean, Hooi Hooi & Shabbir, Muhammad Shahbaz, 2012. "Environmental Kuznets Curve hypothesis in Pakistan: Cointegration and Granger causality," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(5), pages 2947-2953.

    More about this item


    Environmental Economics and Policy; International Relations/Trade;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • 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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