Does Trade Liberalization Increase High-Polluting Industries?: An Empirical Study of Thailand
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Jul 19, 2018
Keywords:
Trade Liberalization Pollution Haven Environmental Impact
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Abstract
It is widely known that trade liberalization has a positive effect on economic growth of Thailand. However, it is debatable whether trade liberalization has increased the production level of pollution-intensive products in Thailand. This study examined whether the impact of trade liberalization has resulted in higher production in high polluting industries than lower polluting industries. The study used panel data from 28 industry sectors during the period of 1991 to 2014 and selected the most appropriate specification between fixed effects and random effects. The result showed that the combination effects of trade liberalization and applied tariff reduction (62.36%), will increase the production value of high polluting industries by 84.81%. Therefore, Thai government should demonstrate higher level of industrial emissions regulations and should encourage the production of environmentally-friendly goods and services in order to achieve sustainable development in Thailand.
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References
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Arouri, M.E.H., Caporale, G.M., Rault, C., Sova, R., & Sova, A. (2012). Environmental Regulation and Competitiveness: Evidence from Romania. CESifo Working Paper Series No. 3916.
Atkeson, A., & Burstein, A. (2010). Innovation, Firm Dynamics and International Trade. Journal of Political Econonomics, 118(3): 433–484.
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Bustos, P., 2011. Trade Liberalization, Exports and Technology Upgrading: Evidence on the Impact of Mercosur on Argentinian firms. American Economics Review, 101(1): 304–340.
Chichilnisky, G. (1994). North-South Trade and the Global Environment. American Economic Review, 84(4): 427-434.
Copeland, B.R., & Taylor, M.S. (1994). North–South Trade and the Environment. Quarterly Journal of Economics, 109(3), 755–787.
Costantini, J.A., Melitz, M.J. (2008). The Dynamics of Firm-level Adjustment to Trade Liberalization. In: E. Helpman, D. Marin & T. Verdier (Eds.), The Organization of Firms in a Global Economy. (pp. 107–141). Harvard University Press.
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Ederington, J. & Minier, J. (2003). Is Environmental Policy a Secondary Trader Barrier? An Empirical Analysis. Canadian Journal of Economics, 36(1): 137-154.
Forslid, R., Okubo, T., & Ulltveit-Moe, K.H. (2014). Why Are Firms that Export Cleaner? Working Paper 4817. CESifo.
Grossman, G. M., & Krueger, A. B. (1993). Environmental Impacts of a North American Free Trade Agreement. In P. M.
Garber (Ed.), The Mexico-U.S. Free Trade Agreement (pp. 13-56). Cambridge: MIT Press.
Hettige, H., Lucas, R.E., & Wheeler, D. (1992). The toxic intensity of industrial production: global patterns, trends and trade policy. American Economic Review Papers and Proceedings, 82(2): 478-481.
Inmaculada, M.Z., Anca M.V., & Martina V. (2012). CEECS Integration into Regional Production Networks: Trade Effects of EU-accession. Working Papers 2012/04. Economics Deparment , Universitat Jaume I, Castellon (Spain).
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Levinson, A., & Taylor, S. (2008). Unmasking the Pollution Haven Effect. International Economic Review, 49(1): 223-254.
Managi, S., Hibiki, A., & Tsurumi, T. (2009). Does trade openness improve environmental quality?. Journal of Environmental Economics and Management, 58(3): 346-363.
McGuire M.C. (1982). The Effect of Environmental Regulation on Production and Trade in a Hecksher-Ohlin World. Working Paper, College Park, University of Maryland, Department of Economics and Bureau of Business and Economic Research.
Mukhopadhyay, K. (2006). Impact on the Environment of Thailand’s Trade with OECD Countries. UNESCAP Working paper. United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
Pethig R. (1976). Pollution, Welfare, and Environmental Policy in the Theory of Comparative Advantage. Journal of Environmental Economics and Management, 2(3): 160-169.
Porter, M., & van der Linde, C. (1995). Toward a New Conception of the Environment Competitiveness Relationship. Journal of Economic Perspective, 9(4): 97–118.
Rath, B., Jena, P.R., & Sahu N.C. (2005). Does Trade Liberalization Create Pollution Haven? An Indian Experience. International Journal of Environment and Development, 2(4):253-270.
Thompson, P., & Strohm, L.A. (1996). Trade and Environmental Quality: A Review of the Evidence. Journal of Environment and Development, 5(4): 363-388.
Tobey, J. A. (1990). The Effects of Domestic Environmental Policies on Patterns of World Trade: An Empirical Test. Kyklos, 43(2): 191-209.
Van Beers, C., & van den Bergh J.C. (1997). An Empirical Multi-country Analysis of the Impact of Environmental Regulations on Foreign Trade Flows. Kyklos, 50(1): 29-46.
Vutha H., & Jalilian H. (2008). Environmental Impacts of the ASEAN-China Free Trade Agreement on the Greater Mekong Sub-Region. IISD.
Arouri, M.E.H., Caporale, G.M., Rault, C., Sova, R., & Sova, A. (2012). Environmental Regulation and Competitiveness: Evidence from Romania. CESifo Working Paper Series No. 3916.
Atkeson, A., & Burstein, A. (2010). Innovation, Firm Dynamics and International Trade. Journal of Political Econonomics, 118(3): 433–484.
Berman, E., & Bui, L. (1998). Environmental Regulation and Productivity: Evidence from Oil Refineries. Working Paper no.6776. Cambridge: National Bureau of Economics.
Bhagwati, J., & Srinivasan, T.N. (1996). Trade and the Environment: Does Environmental Diversity Detract from the Case for Free trade? in J. Bhagwati & R. Hudec (Ed.), Fair Trade and Harmonization: Prerequisites for Free Trade? (pp159-223). Cambridge: MIT Press.
Brunnermeier, S., & Levinson, A. (2004). Examining the Evidence on Environmental Regulations and Industry Location. Journal of Environment and Development, 13(1): 6–41.
Bustos, P., 2011. Trade Liberalization, Exports and Technology Upgrading: Evidence on the Impact of Mercosur on Argentinian firms. American Economics Review, 101(1): 304–340.
Chichilnisky, G. (1994). North-South Trade and the Global Environment. American Economic Review, 84(4): 427-434.
Copeland, B.R., & Taylor, M.S. (1994). North–South Trade and the Environment. Quarterly Journal of Economics, 109(3), 755–787.
Costantini, J.A., Melitz, M.J. (2008). The Dynamics of Firm-level Adjustment to Trade Liberalization. In: E. Helpman, D. Marin & T. Verdier (Eds.), The Organization of Firms in a Global Economy. (pp. 107–141). Harvard University Press.
Cui, J., Lapan, H., Moschini, G. (2012). Are Exporters more Environmentally Friendly than Non-exporters? Theory and Evidence. Working Paper 12022. Iowa State University.
Dean, J.M. (1992). Trade and the Environment: A Survey of the Literature. In: P. Low (Ed.), International trade and the environment World Bank discussion paper No. 159. Washington DC: World Bank.
Ederington J., Levinson, A., & Minier, J. (2004). Trade Liberalization and Pollution Havens. Advances in Economic Analysis and Policy, 4(2): 1330-1355.
Ederington, J. & Minier, J. (2003). Is Environmental Policy a Secondary Trader Barrier? An Empirical Analysis. Canadian Journal of Economics, 36(1): 137-154.
Forslid, R., Okubo, T., & Ulltveit-Moe, K.H. (2014). Why Are Firms that Export Cleaner? Working Paper 4817. CESifo.
Grossman, G. M., & Krueger, A. B. (1993). Environmental Impacts of a North American Free Trade Agreement. In P. M.
Garber (Ed.), The Mexico-U.S. Free Trade Agreement (pp. 13-56). Cambridge: MIT Press.
Hettige, H., Lucas, R.E., & Wheeler, D. (1992). The toxic intensity of industrial production: global patterns, trends and trade policy. American Economic Review Papers and Proceedings, 82(2): 478-481.
Inmaculada, M.Z., Anca M.V., & Martina V. (2012). CEECS Integration into Regional Production Networks: Trade Effects of EU-accession. Working Papers 2012/04. Economics Deparment , Universitat Jaume I, Castellon (Spain).
Levinson, A., & Taylor, S. (2001). Trade and the environment: Unmasking the Pollution Haven Effect. Georgetown University and University of Wisconsin Manuscript.
Levinson, A., & Taylor, S. (2008). Unmasking the Pollution Haven Effect. International Economic Review, 49(1): 223-254.
Managi, S., Hibiki, A., & Tsurumi, T. (2009). Does trade openness improve environmental quality?. Journal of Environmental Economics and Management, 58(3): 346-363.
McGuire M.C. (1982). The Effect of Environmental Regulation on Production and Trade in a Hecksher-Ohlin World. Working Paper, College Park, University of Maryland, Department of Economics and Bureau of Business and Economic Research.
Mukhopadhyay, K. (2006). Impact on the Environment of Thailand’s Trade with OECD Countries. UNESCAP Working paper. United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
Pethig R. (1976). Pollution, Welfare, and Environmental Policy in the Theory of Comparative Advantage. Journal of Environmental Economics and Management, 2(3): 160-169.
Porter, M., & van der Linde, C. (1995). Toward a New Conception of the Environment Competitiveness Relationship. Journal of Economic Perspective, 9(4): 97–118.
Rath, B., Jena, P.R., & Sahu N.C. (2005). Does Trade Liberalization Create Pollution Haven? An Indian Experience. International Journal of Environment and Development, 2(4):253-270.
Thompson, P., & Strohm, L.A. (1996). Trade and Environmental Quality: A Review of the Evidence. Journal of Environment and Development, 5(4): 363-388.
Tobey, J. A. (1990). The Effects of Domestic Environmental Policies on Patterns of World Trade: An Empirical Test. Kyklos, 43(2): 191-209.
Van Beers, C., & van den Bergh J.C. (1997). An Empirical Multi-country Analysis of the Impact of Environmental Regulations on Foreign Trade Flows. Kyklos, 50(1): 29-46.
Vutha H., & Jalilian H. (2008). Environmental Impacts of the ASEAN-China Free Trade Agreement on the Greater Mekong Sub-Region. IISD.