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UBC Theses and Dissertations

Is free trade free of environmental cost? Jung, Munhee


The impact of international trade on the environment has been the field of focus since the 1970’s. There have been a number of empirical studies exploring the environmental consequence of free trade but the results are mixed and only a few environmental indicators have been used in place of the total environmental impact. In this study, I used combined environmental cost data which converted environmental impact indicators into US$ terms (the data is taken from World Bank database). Also, by taking advantage of panel data (observations from 60 countries over 25 years) and (two-way) fixed effects model, I attempted to reduce the threat of endogeneity problem. Most importantly, environmental impact which is filtered through the trade induced changes of economic activity was analyzed in parallel with unfiltered through effects. And the results revealed that trade openness reduces national level environmental cost rather than increasing it. Meanwhile, income related technique effect was found to be underperforming and when the full sample was split into four income groups, the income-environment relationship appeared to be closer to N-shape as opposed to the inverted U-shaped environmental kutznets curve hypothesis.

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