Is Trade Good or Bad for the Environment? Sorting Out the Causality

Frankel, Jeffrey A.; Rose, Andrew Kenan

doi:10.2139/ssrn.456840

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Is Trade Good or Bad for the Environment? Sorting Out the Causality

36 Pages Posted: 8 Oct 2003

See all articles by Jeffrey A. Frankel

Jeffrey A. Frankel

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Andrew Kenan Rose

University of California - Haas School of Business; NUS Business School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

There are 2 versions of this paper

Date Written: September 2003

Abstract

We seek to contribute to the debate over globalization and the environment by asking: What is the effect of trade on a country's environment, for a given level of GDP? We take specific account of the endogeneity of trade, using exogenous geographic determinants of trade as instrumental variables. We find that trade tends to reduce three measures of air pollution. Statistical significance is high for concentrations of SO2, moderate for NO2, and lacking for particulate matter. While results for other environmental measures are not as encouraging, there is little evidence that trade has a detrimental effect on the environment.

Keywords: Openness, Growth, pollution, Kuznets, instrumental, variable, causality, simultaneity

JEL Classification: F18

Suggested Citation: Suggested Citation

Frankel, Jeffrey A. and Rose, Andrew Kenan and Rose, Andrew Kenan, Is Trade Good or Bad for the Environment? Sorting Out the Causality (September 2003). Available at SSRN: https://ssrn.com/abstract=456840 or http://dx.doi.org/10.2139/ssrn.456840