The Potential and Constraints of the Exports of Environmental Goods (EGs): the case of Bangladesh

Although the economic importance of environmental goods (EGs) is on a rise with increasing focus on global climate change issues, it is surprising that export growth of environmental goods is witnessing a downward trend in developing countries compared to developed countries. Researchers are divided over explanations for possible reasons: while some argue that lack of technological availability and insufficiency of the technology transfer isolate developing countries from the world market; others contend that country-specific ‘behind the border’ constraints prevent these countries from fully exploiting their export potential. This paper examines the potentials and constraints for Bangladesh EGs exports by applying a stochastic frontier gravity type model. The estimation results show that Bangladesh remained far from reaching its export potential during 2001 and 2007 despite there being an increased level of realization with the East Asian economies. The results also suggest that reducing ‘explicit beyond the border’ constraints by partner countries aided Bangladesh in attaining positive export growth between 2001 and 2007.