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Are free trade agreements good for the environment? A panel data analysis
Author(s) -
Nemati Mehdi,
Hu Wuyang,
Reed Michael
Publication year - 2019
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/rode.12554
Subject(s) - greenhouse gas , cointegration , free trade agreement , economics , free trade , panel data , unit root , international economics , developing country , environmental quality , ordinary least squares , international trade , liberalization , unit (ring theory) , econometrics , economic growth , ecology , market economy , biology , mathematics education , mathematics
This study empirically examines the relationship between free trade agreements ( FTA s) and greenhouse gas ( GHG ) emissions. For this purpose, we use three different FTA s: the Southern Common Market, the North American Free Trade Agreement, and the Australia–United States Free Trade Agreement. These FTA s are between developing, both developing and developed, and only developed countries, respectively. Panel unit root, panel cointegration, and fully modified ordinary least squares estimations are employed to examine the long‐run relationship between GHG emissions and trade liberalization. The results indicate that the environmental effects of FTA s depend on the different agreement types. When FTA s are between only developed or developing countries, overall there is no environmental damage, and these types of FTA s can be beneficial for the environmental quality in the long run. However, when developing and developed countries are in a trade agreement, overall environmental quality decreases due to increased GHG emissions.