Same Trade Openness Yet Different Environmental Quality — But Why?

Shu-Chen Chang and Hsiao-Fen Chang
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Shu-Chen Chang: Department of Business Administration, National Formosa University, Yunlin County 632, Taiwan
Hsiao-Fen Chang: Department of Accounting Information, Aletheia University, No. 32, Zhenli St., Tamsui District, New Taipei City 25103, Taiwan

Journal of International Commerce, Economics and Policy (JICEP), 2020, vol. 11, issue 01, 1-17

Abstract: This paper re-studies the relationship between trade openness and environmental pollution. Through the theoretical framework, there is a non-uniform effect of trade openness on environmental pollution. Utilizing four alternative measures of trade openness as threshold variables, this paper examines the effect of trade openness on environmental pollution. We adopt a regression with nonlinearity, in which our nonlinear model includes two regressions — a threshold model and an interaction-term model. Utilizing four alternative measures of trade openness, our threshold test shows a single-threshold effect on pollutant emissions, implying that there are two regimes: low- and high-corruption. Our empirical results show that for countries with high-corruption, increases in trade openness significantly reduce pollutants emissions whatever CO2 emissions or SO2 emissions, and the larger effects of trade openness on environmental quality. However, the impact of trade openness on pollution was not found in countries with low-corruption. This study suggests that further trade openness and reduced environmental degradation (i.e., decline in CO2 and SO2 emissions) are compatible rather than competing objectives, especially in high-corruption countries. Furthermore, our results also show that in low-corruption countries, the negative effects of income on CO2 emissions are statistically significant, but in high-corruption countries it is not so.

Keywords: Pollution; corruption; trade openness (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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DOI: 10.1142/S1793993320500027

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