Trade Integration & Political Turbulence: Environmental Policy Consequences

Per G. Fredriksson () and Muthukumara Mani

No 01/150, IMF Working Papers from International Monetary Fund

Abstract: This paper seeks to contribute to the unresolved issue of the effect of economic integration on environmental policy. In particular, we discuss the joint impact of trade openness and political uncertainty. Our theory predicts that the effect of trade integreation on the environment is conditional on the degree of political uncertainty. Trade integration raises the stringency of environmental policies, but the effect is reduced when the degree of political uncertainty is great. Political uncertainty has a positive effect on environmental policy as it reduces lobbying efforts. Applying our model to a unique data set of primarily developing countries, the empirical findings support the theory and are robust under alterntive specifications.

Keywords: Trade liberalization; Economic policy; Environment; Economic models (search for similar items in EconPapers)
Date: 2001-10-15
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