The Impact of Trade Liberalization on Air Pollution: In Case of Ethiopia

Tariku, Lamessa (2015): The Impact of Trade Liberalization on Air Pollution: In Case of Ethiopia. Published in: New Media and Mass Communication , Vol. 40, (October 2015): pp. 43-55.

Abstract

The policy of trade liberalization and increased openness is seen as a means of stimulating economic growth for developing countries. However, there is argument from environmentalists side that trade has adverse environmental effects. Given the potential benefits of trade liberalization policies, it is important to examine whether such policies are in fact in conflict with the environment as they accelerate economic growth.This paper with aim of studying the impact of trade liberalization on environment has made use of a time series data from 1970 to 2010. The impact of trade on environment was analysed by decomposing into scale, composition, and technique effect. The Johansen co-integration and error-correction model technique has been used in order to examine the long run and the short run dynamics of the system respectively. The result indicate that scale effect, Economic growth and Population density are positively related to air pollution while it is negatively related with trade intensity and composition effect. In short run, scale effect and population density have negative environmental effects while trade intensity and composition effect are environmental friendly similar to long run results. Thus, there is a need to diversify on areas where the country has comparative advantage in international trade to maximize the gains from trade and Ethiopia has to critically examine and identify her trading opportunities so as to ensure that decisions which endanger areas where Ethiopia exhibits comparative advantage should not compromised.

• Item Type: MPRA Paper
• Language: English
• Keywords: Trade liberalization, Trade intensity, Scale effect, Composition effect, Technique effect, Ethiopia
• Subjects: F - International Economics > F1 - Trade > F10 - General; F - International Economics > F1 - Trade > F11 - Neoclassical Models of Trade; F - International Economics > F1 - Trade > F18 - Trade and Environment; F - International Economics > F2 - International Factor Movements and International Business

References

Ahmad, Y.J., El Seraf, S., and Lutz, E., 1989. Environmental Accounting for sustainable development.

In ElSerafy, S. and Lutz E.(eds).Environmental and Resource a ccounting. A UNEP -World BankSymposium.

Ahzar, U., Khalil, S., and Ahmed, M.H., no date. Environmental Effects of Trade Liberalization: A Case Study of Pakistan.

Akbostancl, E., Tunc, I.G., and Asik, S.T., 2004. The pollution haven hypothesis and the role of dirty industries in Turkey’s Export. Economic Research center (ERC) working paper In Economics, Middle East technical University.

Beckerman, W., 1992. Economic growth and the environment: whose growth? Whose environment. World Development, 20(4), pp. 481-496.

Bruhetayet Mulu, 2009. The impact of trade liberalization on environment in Sub-Saharan countries. Master’s thesis. Addis Ababa, Addis Ababa University.

Cole, M.A., 2004. Trade, the pollution haven hypothesis and the environmental Kuznets curve: examining the linkages. Ecological Economics, 48 (1), pp. 71– 81.

Cole, M.A., & Neumayer, E. 2004. Examining the impact of demographic factors on air pollution. Population and Development Review, 26(1), pp. 5–21.

Copeland, B.R., and Taylor, M.S., 1995.Trade and trans-boundary pollution.American Economic Review, 85, pp.716- 37.

Copeland, B.R., and Taylor, M.S., 2004. Trade, Growth and the Environment.Journal of Economic Literature, 42(1), pp. 7-71

Esty, D.C., 2001. Bridging the trade-environment divide. Journal of EconomicPerspectives, 5 (3), pp. 353-377.

ESTY, D.C., 1994. Greening the GATT: Trade, Environment, and the Future. Washington, DC: Institute for International Economics.

Federal Democratic Republic of Ethiopia (FDRE), 2011. Ethiopia’s Climate-Resilient Green Economy strategy, Addis Ababa.

Federal Democratic Republic of Ethiopia (FDRE), 2006. The national implementation plan for the Stockholm convection, Addis Ababa.

Feridun, M., 2006. Impact of Trade Liberalization on the Environment in Developing Countries: The Case of Nigeria. Journal of developing societies, 22(1), pp. 39-56.

Food and Agricultural Organization (FAO), 2006. Global Forest Resource Assessment: Progress towards sustainable Forest management, Rome.

Food and Agricultural Organization (FAO), 2010. Global forest resource assessment: Country report, Rome.

Goodland, R., and Daly, H., 1992. Why northern income growth is not the solution for the Southern poverty. Ecological Economics 8(2), pp. 85-101.

Grossman, G.M., and Krueger, A.B., 1991. Environmental Impacts of a North-American Free-Trade Agreement. National Bureau of Economic Research (NBER), working paper 3914.

Grossman, G.M., and Krueger, A.B., 1995. Economic growth and the environment. The Quarterly Journal of Economics, 110, (2), pp. 353-377.

Gujarati, D., 2004. Basic Econometrics, Fourth Edition, NewYork

Halkos, G.E., n.d. Economic development and environmental degradation: Testing the existence of an Environmental Kuznets Curve at regional level. Unpublished document available on line at http://wwwsre.wuwien.ac.at/ersa/ersaconfs/ersa06/papers/527.

Harris, M., 2004. Trade and the environment. A Global Development and Environment (GDAE), Teaching module on social and environmental issues in economics, Tufts University Medford, MA 02155.

Harris, M., 2004. Trade and the environment. Global Development and Environment Institute (GDAE), Tufts University Medford, MA 02155.

Hitam, M.B., and Borhan, H.B., 2012. FDI, Growth and the Environment: Impact on Quality of Life in Malaysia. Procedia-Social and Behavioural Sciences, 50, pp.333-342.

Jha, V., Markandya, A., and Vossenaar R., 1999. Reconciling trade and the environment. Lesson from case studies in developing countries. Massachusetts: Edward Elgar.

Mukhopadhyay, K., and Chakraborty, D., 2005. Is liberalization of trade good for the environment? Evidence from India. Asia-Pacific Development Journal, 12(1), pp.109-136.

Muradian, R., and Martinez-Alier, J., 2001.Trade and the environment: from a ‘Southern’ Perspective.Ecological Economics 36, 281–297.

National Meteorological Agency (NMA), 2007. Climate Change Technology Needs Assessment Report of Ethiopia. Global Environmental Facility (GEF), United Nation Development Program (UNDP).

National Meteorological Services Agency (NMSA), 2001. Initial National Communication of Ethiopia (INCE) to the UNFCCC.

Panayotou, T., 1993. Empirical Tests and Policy Analysis of Environmental Degradation at Different Stages of Economic Development, Working Paper WP238.

Perman, R., Yueman, J., McGilvary and Common, M., 2003. Natural Resource and Environmental Econmics 3rd edition. Glasgow: Bell and Bain LTD.

Pillarisett, J.R., and van den Bergh, J.C. J.M., 2010. Sustainable nations: what do aggregate indexes tell us? Environ Dev Sustain, 12, pp. 49–62.

Samimi, A.J., Ghaderi, S., and Ahmadpour, n.d. Environmental Sustainability and Economic Growth: Evidence from Some Developing Countries.

Sato, M. and Samreth, S., 2008. Assessing Sustainable Development by Genuine Saving Indicator from Multidimensional Perspectives. Munich Personal RePEc Archive,MPRA No. 9996.

Shafik, N., and Bandyopadhyay, S., 1992. Economic Growth and Environmental Quality: Time Series and Cross-country Evidence. Background Paper for the World Development Report, Working paper 0904. Washington, DC: The World Bank.

Stern, D.I., Common, M.S., and Barbier, E.B., 1996. Economic Growth and Environmental Degradation: The Environmental Kuznets Curve and Sustainable Development.World Development, 24, (7), pp. 1151-l160.

Stock, J.M., and Watson, M.W., 2001. Introduction to Econometrics, Pearson Addison Wesley.

Suri, V., and Chapman, D., 1998. Economic growth, trade, and energy: implications for the Environmental Kuznets Curve. Ecological Economics 25, pp. 195–208

Temurshoev, U., 2006. Pollution Haven Hypothesis or Factor Endowment Hypothesis: Theory and empirical examination for the US and China. Working Paper Series 292, Charles University, Center for Economic Research and Graduate Education (CERGE) and Economics Institute (EI), Academy of Sciences of the Czech Republic.

U.S. Congress, 1992. Trade and Environment: Conflicts and Opportunities, Office of Technology AssessmentOTA-BP-ITE-94 Washington, DC.

Verbeek, M., 2002. Guide to modern econometrics, second edition, John Wiley & Sons.

WTO, 2004. Trade and Environment at World trade Organization, available online at: http://www.wto.org/english/res_e/reser_e/ersd201101_e.pdf

World Bank, 2001. Global Economic prospects. Washington. D.C.

Yale University, 2005. Environmental Sustainability Index report, Benchmarking National Environmental Stewardship. Yale Center for Environmental Law and Policy.

Yemek, E., 2004. Environmental Effects of Trade: Empirical Econometric Analysis of Panel Data for Central Africa. South Africa: University of Pretoria.