TY  - JOUR
AU  - Frankel,Jeffrey A.
AU  - Rose,Andrew K.
TI  - Is Trade Good or Bad for the Environment? Sorting Out the Causality
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9201
PY  - 2002
Y2  - September 2002
UR  - http://www.nber.org/papers/w9201
L1  - http://www.nber.org/papers/w9201.pdf
N1  - Author contact info:
Jeffrey A. Frankel
Kennedy School of Government
Harvard University
79 JFK Street
Cambridge, MA 02138
Tel: 617/496-3834
Fax: 617/496-5747
E-Mail: jeffrey_frankel@harvard.edu

Andrew K. Rose
Haas School of Business Administration
University of California, Berkeley
Berkeley, CA 94720-1900
Tel: 510/642-6609
Fax: 510/642-4700
E-Mail: arose@haas.berkeley.edu
AB  - What is the effect of trade on a country's environment, for a given level of GDP?  Some have observed an apparent positive correlation between openness to trade and measures of environmental quality.  But this could be due to endogeneity of trade, rather than causality.  This paper uses exogenous determinants of trade   geographical variables from the gravity model   as instruments to isolate the effect of openness.  The finding is that trade may indeed have a beneficial effect on three measures of air pollution.   Statistical significance is lacking for Particulate Matter, but is moderate for NO2, and high for SO2.  Results for broader environmental measures are not as encouraging, but one can at least say that there is little evidence that trade has the detrimental effect on the environment that the race-to-the-bottom theory would lead one to expect.  The larger effect appears to come via income itself: our results generally support the environmental Kuznets curve, which says that growth harms the environment at low levels of income and helps at high levels, and to support the proposition that openness to trade accelerates the growth process.
ER  -