Trade Liberalization and Environmental Sustainability Risk: Do Governance and Regulatory Structures Influence the Dynamics?

ABSTRACT

This study examines the effect of trade openness on environmental sustainability risk, with emphasis on the role of governance and regulatory factors. Data for the study were compiled from 39 countries in Sub-Saharan Africa (SSA) from 2001 to 2018. Results from a two-step system generalized method of moments estimation suggest that for the sub-region, governance and regulatory variables significantly moderate the trade openness–CO2 emission nexus, suggesting that improved governance and regulatory structures help in reducing CO2 emissions associated with trade openness. For the trade openness–ecological footprint relationship, the empirical estimates further suggest that government effectiveness significantly moderates the nexus.

KEYWORDS:

• Trade openness
• environmental sustainability risk
• regulatory and governance variables
• Two-Step system GMM

Disclosure statement

No potential conflict of interest was reported by the author(s).