The impact of trade openness on environmental pollution: A panel cointegration and causality analysis

This chapter analyzes the impact of trade openness on environmental pollution in the newly industrialized countries that have focused on trade over the period 1971-2010 by using recently developed panel unit root, cointegration, and causality tests. The results indicate a cointegration relationship between the variables. The results also show that trade openness increases carbon dioxide emissions with the elasticity of 0.53 and there is a Granger causality running from trade openness to carbon dioxide emissions in the long run. These findings may provide some policy implications. Without taking into account impact of trade on pollutions, optimistic environmental Kuznets curve hypothesis would be invalid. Therefore, policymakers who decide on environment policies should pay attention to not only growth effects but also trade effects on pollutions. Future empirical analysis would expose the new evidences for governmental policies and environmental regulations to change these effects positively. © 2015, IGI Global. All rights reserved.