Impact of trade openness on environment in China
Abstract
The study investigates the impact of trade openness on pollution in China by applying wavelet-coherence analysis, phase-difference technique and Breitung and Candelon (2006) causality test. The estimated results provide some dynamic association between trade openness and pollutant variables. The results indicate that trade openness has increased pollution in China especially after 2001 when China became member of WTO. It suggests that “pollution haven hypothesis” exists in China. These results imply that trade openness has increased exports which has increased domestic production by increasing the scale of industries, which in turn has increased pollution in the country. The findings of spectral domain causality test show that trade openness causes carbon emission both in short, medium and long runs. It indicates that trade openness forecast carbon emissions in China. The results suggest that China should take suitable measures while following trade openness policy to avoid pollution.
Keyword : China, pollution, trade openness, wavelet, phase-difference, causality
How to Cite
Jun, W., Mahmood, H., & Zakaria, M. (2020). Impact of trade openness on environment in China. Journal of Business Economics and Management, 21(4), 1185-1202. https://doi.org/10.3846/jbem.2020.12050
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Erdogan, A. M. (2014). Bilateral trade and the environment: A general equilibrium model based on new trade theory. International Review of Economics and Finance, 34, 52–71. https://doi.org/10.1016/j.iref.2014.07.003
Ertugrul, H. M., Cetin, M., Seker, F., & Dogan, E. (2016). The impact of trade openness on global carbon dioxide emissions: Evidence from the top ten emitters among developing countries. Ecological Indicators, 67, 543–555. https://doi.org/10.1016/j.ecolind.2016.03.027
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Ferrantino, M. (1997). International trade, environmental quality and public policy. World Economy, 20(1), 43–72. https://doi.org/10.1111/1467-9701.00057
Frankel, J., & Rose, A. (2005). Is trade good or bad for the environment? Sorting out the causality. The Review of Economics and Statistics, 87(1), 85–91. https://doi.org/10.1162/0034653053327577
Goupillaud, P., Grossmann, A., & Morlet, J. (1984). Cycle-octave and related transforms in seismic signal analysis. Geoexploration, 23(1), 85–102. https://doi.org/10.1016/0016-7142(84)90025-5
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Hallett, A. H., & Richter, C. (2008). Have the Eurozone economies converged on a common European cycle? International Economics and Economic Policy, 5(1–2), 71–101. https://doi.org/10.1007/s10368-008-0113-0
He, J. (2009). China’s industrial SO2 emissions and its economic determinants: EKC’s reduced vs. structural model and the role of international trade. Environment and Development Economics, 14(2), 227–262. https://doi.org/10.1017/S1355770X0800452X
Jalil, A., & Feridun, M. (2011). The impact of growth, energy and financial development on the environment in China: A cointegration analysis. Energy Economics, 33(2), 284–291. https://doi.org/10.1016/j.eneco.2010.10.003
Jalil, A., & Mahmud, S. F. (2009). Environment Kuznets curve for CO2 emissions: A cointegration analysis for China. Energy Policy, 37(12), 5167–5172. https://doi.org/10.1016/j.enpol.2009.07.044
Jayanthakumaran, K., & Liu, Y. (2012). Openness and the environmental Kuznets curve: Evidence from China. Economic Modelling, 29(3), 566–576. https://doi.org/10.1016/j.econmod.2011.12.011
Jayanthakumaran, K., Verma, R., & Liu, Y. (2012). CO2 emissions, energy consumption, trade and income: A comparative analysis of China and India. Energy Policy, 42, 450–460. https://doi.org/10.1016/j.enpol.2011.12.010
Jun, W., Zakaria, M., Shahzad, S. J. H., & Mahmood, H. (2018). Effect of FDI on pollution in China: New insights based on wavelet approach. Sustainability, 10(11), 1–20. https://www.mdpi.com/2071-1050/10/11/3859/pdf
Kang, Y.-Q., Zhao, T., & Yang, Y.-Y. (2016). Environmental Kuznets curve for CO2 emissions in China: A spatial panel data approach. Ecological Indicators, 63, 231–239. https://doi.org/10.1016/j.ecolind.2015.12.011
Kanjilal, K., & Ghosh, S. (2013). Environmental Kuznets curve for India: Evidence from tests for cointegration with unknown structural breaks. Energy Policy, 56, 509–515. https://doi.org/10.1016/j.enpol.2013.01.015
Kellenberg, D. K. (2009). An empirical investigation of the pollution haven effect with strategic environment and trade policy. Journal of International Economics, 78(2), 242–255. https://doi.org/10.1016/j.jinteco.2009.04.004
Kukla-Gryz, A. (2009). Economic growth, international trade and air pollution: A decomposition analysis. Ecological Economics, 68(5), 1329–1339. https://doi.org/10.1016/j.ecolecon.2008.09.005
Le, T. H., Chang, Y., & Park, D. (2016). Trade openness and environmental quality: International evidence. Energy Policy, 92, 45–55. https://doi.org/10.1016/j.enpol.2016.01.030
Li, P., & Tu, Y. (2014). The impacts of openness on air quality in China. Environment and Development Economics, 19(2), 201–227. https://doi.org/10.1017/S1355770X13000557
Li, T., Wang, Y., & Zhao, D. (2016). Environmental Kuznets Curve in China: New evidence from dynamic panel analysis. Energy Policy, 91, 138–147. https://doi.org/10.1016/j.enpol.2016.01.002
Li, Z., Xu, N., & Yuan, J. (2015). New evidence on trade-environment linkage via air visibility. Economics Letters, 128, 72–74. https://doi.org/10.1016/j.econlet.2015.01.014
Lin, B. Q., & Sun, C. W. (2010). Evaluating carbon dioxide emissions in international trade of China. Energy Policy, 38(1), 613–621. https://doi.org/10.1016/j.enpol.2009.10.014
Lin, F. (2017). Trade openness and air pollution: City-level empirical evidence from China. China Economic Review, 45, 78–88. https://doi.org/10.1016/j.chieco.2017.07.001
Managi, S., & Kumar, S. (2009). Trade-induced technological change: Analyzing economic and environmental outcomes. Economic Modelling, 26(3), 721–732. https://doi.org/10.1016/j.econmod.2009.02.002
Managi, S., Hibiki, A., & Tsurumi, T. (2009). Does trade openness improve environmental quality? Journal of Environmental Economics and Management, 58(3), 346–363. https://doi.org/10.1016/j.jeem.2009.04.008
Nasir, M., & Rehman, F. (2011). Environmental Kuznets Curve for carbon emissions in Pakistan: An empirical investigation. Energy Policy, 39(3), 1857–1864. https://doi.org/10.1016/j.enpol.2011.01.025
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