Springer Nature is making SARS-CoV-2 and COVID-19 research free. View research | View latest news | Sign up for updates

Does trade matter for environmental degradation in developing countries? New evidence in the context of export product diversification

  • 26 Accesses

Abstract

Global warming is a serious problem facing the world today. To minimize it, scholars are trying to find the reasons behind increasing CO2 emissions. This study examines the effects of overall export product diversification, extensive margin, and intensive margin on CO2 emissions as indicators of environmental degradation in 84 developing countries for the period of 1971–2014 in the context of the environmental Kuznets curve (EKC) hypothesis using three estimators, namely, autoregressive distributed lag (ARDL) bounds test, dynamic ordinary least squares (DOLS), and fully modified ordinary least squares (FMOLS). The empirical findings reveal that EKC hypothesis is valid. The overall empirical findings from various approaches show that overall diversification, extensive margin, and intensive margin have a positive and significant effect on CO2 emissions.

This is a preview of subscription content, log in to check access.

Notes

  1. 1.

    This income level is estimated around $22,500 by Klinger and Lederman (2006).

  2. 2.

    There are two types of EKC approach in the literature. The first approach (traditional ones) uses GDP and the square of GDP as the independent variables in the model. However, Narayan and Narayan (2010) criticize this approach because of the problem of collinearity or multicollinearity between GDP and the square of GDP in the model. After this criticism, they introduce a “new approach” for EKC in which they exclude the square of GDP. In this approach, only GDP is used as an explanatory variable representing income per capita.

  3. 3.

    A higher value of the Theil index and intensive/extensive margin indicate that the countries’ export basket is low diversified. In other words, in the empirical findings, the negative sign for export product diversification (intensive/extensive margin) means that the effect of export product diversification on CO2 emissions is positive. On the other hand, the positive sign means that the concentration of extensive/intensive margin affects CO2 emissions positively (Gozgor and Can 2016).

References

  1. Akbostanci E, Tunc GI, Turut-Asik S (2007) Pollution haven hypothesis and the role of dirty industries in Turkey’s export. Environ Dev Econ 12:297–322

  2. Ali R, Alwang J, Siegel PB (1991) Is export diversification the best way to achieve export growth and stability: a look at three African countries. The World Bank Southern Africa Department, Working Papers, No.729

  3. Al-mulali U (2012) Factors affecting CO2 emission in the Middle East: a panel data analysis. Energy 44:564–569

  4. Al-mulali U, Ozturk I (2016) The investigation of environmental Kuznets curve hypothesis in the advanced economies: the role of energy prices. Renew Sust Energ Rev 54:1622–1631

  5. Al-mulali U, Ozturk I (2015) The effect of energy consumption, urbanization, trade openness, industrial output, and the political stability on the environmental degradation in the MENA Region. Energy 84:382–389

  6. Al-mulali U, Ozturk I, Lean HH (2015) The influence of economic growth, urbanization, trade openness, financial development, and renewable energy on pollution in Europe. Nat Hazards 79(1):621–644

  7. Apergis N, Can M, Gozgor G, Lau CKM (2018) Effects of export concentration on CO2 emissions in developed countries: an empirical analysis. Environ Sci Pollut Res 25(14):14106–14116

  8. Arouri MH, Ben Youssef AB, M’henni H, Rault C (2012) Energy consumption, economic growth and CO2 emissions in Middle East and North African countries. Energy Policy 45:342–349

  9. Boutabba MA (2014) The impact of financial development, income, energy and trade on carbon emissions: evidence from the Indian economy. Econ Model 40:33–41

  10. Buysse J, Can M, Gozgor G (2018) Globalisation outcomes and the real output in the sub-Saharan Africa LICs: a cointegration analysis. Econ Res 31(1):338–351

  11. Can M, Gozgor G (2017) The impact of economic complexity on carbon emissions: evidence from France. Environ Sci Pollut Res 24:16364–16370

  12. Can M, Gozgor G (2018) Effects of export product diversification on quality upgrading: an empirical study. J Int Trade Econ Dev 27(3):293–313

  13. Dennis A, Shepherd B (2011) Trade facilitation and export diversification. World Econ 34(1):101–122

  14. Energy Information Administration (2013) International energy outlook. EIA, U.S.

  15. Fan Y, Liang Q, Wei Y, Okada N (2007) A model for China’s energy requirements and CO2 emissions analysis. Environ Model Softw 22:378–393

  16. Fang J, Gozgor G, Lu Z, Wu W (2019) Effects of the export product quality on carbon dioxide emissions: evidence from developing economies. Environ Sci Pollut Res 26(12):2181–12193. https://doi.org/10.1007/s11356-019-04513-7

  17. Farhani S, Chaibi A, Rault C (2014) CO2 emissions, output, energy consumption, and trade in Tunisia. Econ Model 38:426–434

  18. Gozgor G, Can M (2016) Export product diversification and the environmental Kuznets curve: evidence from Turkey. Environ Sci Pollut Res 23(21):21594–21603

  19. Gozgor G, Can M (2017a) Causal linkages among the product diversification of exports, economic globalization and economic growth. Rev Dev Econ 21(3):888–908

  20. Gozgor G, Can M (2017b) Does export quality matter for CO2 emissions? Evidence from China. Environ Sci Pollut Res 24(3):2866–2875

  21. Grossman MG, Krueger AB (1995) Economic growth and the environment. Q J Econ 5:353–377

  22. Haddad M, Lim JJ, Saborowski C (2010) Managing openness and volatility: the role of export diversification. The World Bank Poverty Reduction and Economic Management Network, Economic Premise, No.6

  23. Halicioglu F (2009) An econometric study of CO2 emissions, energy consumption, income and foreign trade in Turkey. Energy Policy 37:1156–1164

  24. Hesse H (2008) Export diversification and economic growth, commission on growth and development. Working Paper, No.21

  25. Hongbo L (2018) Essays on trade and sustainable development, PhD Dissertation of Economics, Graduate School of Agriculture Economics and Rural Development, Seoul National University. http://space.snu.ac.kr/bitstream/10371/143114/1/Essays%20on%20Trade%20and%20Sustainable%20Development.pdf (accessed on 11.03.2019)

  26. Hummels D, Klenow PJ (2005) The variety and quality of a nation’s exports. Am Econ Rev 95(3):704–723

  27. Im KS, Pesaran M. H, and Shin Y (2003) Testing for Unit Roots in Heterogeneous Panels. J Econom 115(1): 53–74

  28. Intergovernmental Panel on Climate Change (2013) Climate change 2013: the physical science basis. Contribution of Working Group I to the Fifth Assessment Report of the IPCC. Stocker TF, et al., editors. IPCC

  29. International Energy Agency (2013) Tracking clean energy progress input to the clean energy. Ministerial, IEA, Paris

  30. Jalil A, Mahmud SF (2009) Environment kuznets curve for CO2 emissions: a cointegration analysis for China. Energy Policy 37(12):5167–5172

  31. Jebli BM, Ben Youssef S, Ozturk I (2016) Testing environmental Kuznets curve hypothesis: the role of renewable and non-renewable energy consumption and trade in OECD countries. Ecol Indic 60:824–831

  32. Kao C, Chiang M (2001) On the estimation and inference of a cointegrated regression in panel data. In: Baltagi BH, Fomby TB, Hill RC (eds) Nonstationary panels, panel cointegration, and dynamic panels, vol 15. Advances in Econometrics; Emerald Group Publishing Limited, pp 179–222. https://doi.org/10.1016/S0731-9053(00)15007-8 accessed on 10 January 2017

  33. Kasman A, Duman YS (2015) CO2 emissions, economic growth, energy consumption, trade and urbanization in new EU member and candidate countries: a panel data analysis. Econ Model 44:97–103

  34. Klinger B, Lederman D (2006) Diversification, innovation, and imitation inside the global technology frontier. World Bank Policy Research Working Paper, No. 3872, Washington, D.C., World Bank

  35. Kohler M (2013) CO2 emissions, energy consumption, income and foreign trade: a South African perspective. Energy Policy 63:1042–1050

  36. Kondo Y, Moriguchi Y, Shimizu H (1998) CO2 emissions in Japan: influences of imports and exports. Appl Energy 59(2–3):163–174

  37. Liu H, Kim H, Choe J (2018b) Export diversification, CO2 emissions and EKC: panel data analysis of 125 countries. Asia-Pac J Reg sci3:361–393 https://doi.org/10.1007/s41685-018-0099-8

  38. Liu H, Kim H, Liang S, Kwon O (2018a) Export diversification and ecological footprint: a comparative study on EKC theory among Korea, Japan, and China. Sustainability 10(10):3657

  39. Machado G, Schaeffer R, Worrel E (2001) Energy and carbon embodied in the international trade of Brazil: an input–output approach. Ecol Econ 39:409–424

  40. Mania E (2019) Export diversification and CO2 emissions: an augmented environmental Kuznets curve. J Int Dev. https://doi.org/10.1002/jid.3441

  41. Narayan PK, Narayan S (2010) Carbon dioxide and economic growth: panel data evidence from developing countries. Energy Policy 38:661–666

  42. Neagu O, Teodoru MR (2019) The relationship between economic complexity, energy consumption structure and greenhouse gas emission: heterogeneous panel evidence from the EU countries. Sustainability 11(2):497

  43. Omri A, Daly S, Rault C, Chaibi A (2015) Financial development, environmental quality, trade and economic growth: what causes what in MENA countries. Energy Econ 48:242–252

  44. Onafowora OA, Owoye O (2014) Bound testing approach to analysis of the environment Kuznets curve hypothesis. Energy Econ 44:47–62

  45. Paramati SR, Ummalla M, Apergis N (2016) The effects of foreign direct investment and stock market growth on clean energy use across a panel of emerging market economies. Energy Econ 56:29–41

  46. Pedroni P (2000) Fully-modified OLS for heterogeneous cointegrated panels. Advances in Econometrics, 15: 93-130. Reprinted in Recent developments in panel econometrics, Baltagi, B. (ed.) London, 2003: Edward Elgar

  47. Pedroni P (2004) Panel cointegration: asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis. Economet Theory 20:597–625

  48. Pesaran MH, Shin Y, Smith RP (1999) Pooled mean group estimation of dynamic heterogeneous panels. J Am Stat Assoc 1:94(446):621–634.

  49. Rafiq S, Bloch H, Salim R (2014) Determinants of renewable energy adoption in China and India: a comparative analysis. Appl Econ 46(22):2700–2710

  50. Rasoulinezhad E, Saboori B (2018) Panel estimation for renewable and non-renewable energy consumption, economic growth, CO2 emissions, the composite trade intensity, and financial openness of the commonwealth of independent states. Environ Sci Pollut Res 25(18):17354–17370

  51. Raza SA, Shah N (2018) Testing environmental Kuznets curve hypothesis in G7 countries: the role of renewable energy consumption and trade. Environ Sci Pollut Res 25(27):26965–26977. https://doi.org/10.1007/s11356-018-2673-z

  52. Sebri M, Ben-Salha O (2014) On the causal dynamics between economic growth, renewable energy consumption, CO2 emissions and trade openness: fresh evidence from BRICS countries. Renew Sust Energ Rev 39:14–23

  53. Shahbaz M, Hye QMA, Tiwari AK (2013b) Economic growth, energy consumption, financial development, international trade and CO2 emissions in Indonesia. Renew Sust Energ Rev 25:109–121

  54. Shahbaz M, Solarin SA, Mahmood H, Arouri M (2013a) Does financial development reduce CO2 emissions in Malaysian economy? A time series analysis. Econ Model 35:145–152

  55. Shahzad SJH, Kumar RR, Zakaria M, Hurr M (2017) Carbon emission, energy consumption, trade openeess and financial development in Pakistan: a revisit. Renew Sust Energ Rev 70:185–192

  56. Sharma SS (2011) Determinants of carbon dioxide emissions: empirical evidence from 69 countries. Appl Energy 88(1):376–382

  57. Sinha A, Sen S (2016) Atmospheric consequences of trade and human development: a case of 8 BRIC countries. Atmos Pollut Res 7(6):980–989

  58. Zheng J, Sheng P (2017) The impact of foreign direct investment on the environment: market perspectives and evidence from China. Economies 5(1):1–15

  59. Zhu H, Duan L, Guo Y, Yu K (2016) The effects of FDI, economic growth and energy consumption on carbon emissions in ASEAN-5: evidence from panel quantile regression. Econ Model 58:237–248

  60. Zhu H, Xia H, Guo Y, Peng C (2018) The heterogeneous effects of urbanization and income inequality on CO2 emissions in BRICS economies: evidence from panel quantile regression. Environ Sci Pollut Res 25(17):17176–17193

  61. Zhu Q, Peng X (2012) The impacts of population change on carbon emissions in China during 1978–2008. Environ Impact Assess Rev 36:1–8

Download references

Author information

Correspondence to Behnaz Saboori.

Additional information

Publisher’s note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Responsible Editor: Eyup Dogan

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Can, M., Dogan, B. & Saboori, B. Does trade matter for environmental degradation in developing countries? New evidence in the context of export product diversification. Environ Sci Pollut Res (2020). https://doi.org/10.1007/s11356-020-08000-2

Download citation

Keywords

  • Export product diversification
  • Extensive margin
  • Intensive margin
  • Environmental degradation