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Trade and environment: further empirical evidence from heterogeneous panels using aggregate data

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  • Thomas Jobert

    () (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique)

  • Fatih Karanfil

    (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Anna Tykhonenko

    () (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique)

Abstract

Empirical studies on the trade-environment nexus that use panel data face two simultaneous challenges. One is associated with the potential presence of unobserved cross-country heterogeneity, while the other is due to the use of aggregate data. In this paper, we apply both the dynamic fixed effects and empirical iterative Bayes estimators to show that when country heterogeneity is accurately accounted for in the estimation, it is possible to obtain significant impacts of trade variables on the environment, even though we use aggregate data. Furthermore, using both the parameter estimates and indicators of stringency of environmental regulations, we show that at lower levels of stringency, the probability of having pollution-intensive foreign direct investments increases with a decrease in stringency, but the opposite is true for higher levels of regulatory stringency. This implies that pollution havens may exist only if environmental regulations are very lax or nonexistent.

Suggested Citation

  • Thomas Jobert & Fatih Karanfil & Anna Tykhonenko, 2016. "Trade and environment: further empirical evidence from heterogeneous panels using aggregate data," Working Papers halshs-01295613, HAL.
  • Handle: RePEc:hal:wpaper:halshs-01295613
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01295613
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Bayesian shrinkage estimator; regulatory stringency; trade openness; CO2 emissions; FDI;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F18 - International Economics - - Trade - - - Trade and Environment
    • 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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