Trade openness, urbanization and CO₂ emissions: Dynamic panel data analysis of middle-income countries

ABSTRACT

Using the Pooled Mean Group (PMG) approach of Pesaran, Shin, and Smith [1999. “Pooled Mean Group Estimation of Dynamic Heterogeneous Panels.” Journal of the American Statistical Association 94 (446): 621–634], this article attempts to empirically examine the heterogeneous effects of trade openness and urbanization on CO₂ emissions in 55 middle-income countries over the period from 1992 to 2012. We find that trade openness has a benign effect on the environment in the short run, but a harmful effect in the long run. Meanwhile, our results show that urbanization has a negative and significant impact on CO₂ emissions both in the short and long run, implying that urbanization improves environmental quality. The results are robust even after controlling for a number of factors such as economic or non-economic factors.

KEYWORDS:

• Trade openness
• urbanization
• CO₂ emissions
• PMG estimator
• middle-income countries

JEL CLASSIFICATIONS:

• P25
• Q53
• Q56

Acknowledgements

The authors are grateful to the anonymous referee for helpful comments and the editor for a helpful suggestion that have greatly improved the paper. Any remaining errors are our own responsibility.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. To eliminate possible heteroscedasticity, all variables take logarithmic form.

2. A list of the countries included in the sample is provided in Appendix Table A1.

Additional information

Funding

This research is partially Supported by Natural Science Foundation of Hunan Province of China (No. 2017JJ3293), and also supported by National Natural Science Foundation of China (No. 71703140).