Trade and the environment : the effects of trade liberalization on seven measures of environmental quality

This paper provides strong empirical evidence that, for a given level of GDP, trade tends to promote higher environmental quality as measured by three different types of air pollution: nitrogen dioxide, sulfur dioxide, and suspended particulate matter. In addition to these three measures of air pollution, this paper analyzes carbon dioxide, deforestation, energy depletion, and rural clean water access. All results are determined using cross-country data. Evidence is provided for the presence of an Environmental Kuznets Curve for all measures of environmental quality except for carbon dioxide. This paper contributes to the literature by separating the effects of imports and exports as a percentage of GDP and using a linear combination technique to determine the full effect of trade. This deviates from the definition used in traditional growth literature of exports plus imports as a percentage of GDP. The results of this study are consistent with the findings initially reported by Jeffrey A. Frankel and Andrew K. Rose in their 2005 study Is Trade Good or Bad for the Environment? Sorting out the Causality.