Environmental effects of trade openness: what role do institutions have?

ABSTRACT

The purpose of this paper is to study the effect of trade openness on the environmental quality by taking into consideration the role of institutions. We used a panel of 143 countries observed during the period 2006–2015 and we performed a dynamic panel data based on the system generalized method of moment. We estimated various models which include an aggregated analysis of the whole sample (143 countries), and a disaggregated analysis which is a study for a sample of developed countries (43 countries) and developing countries (100 countries) conducted separately. Findings for the aggregated analysis indicate that trade, as a crucial variable in our model, appears to have no obvious impact on the environmental quality. However, the disaggregated analysis shows how trade harmed the environmental quality and shows the role of institutions in preserving the environment.

KEYWORDS:

• Environment effects
• trade openness
• institutions
• developed and developing countries
• SGMM

Acknowledgements

We are grateful to the anonymous reviewer for his/her comments which have improved the previous draft of this article.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 We are grateful to the anonymous referee for pointing out this remark.