The Effect of Trade Liberalization on Environmental Pollution: The Panel Data Analysis for OECD Countries

This study investigates the impact of trade liberalization on environmental pollution through static and dynamic panel data analyses for six pollution indicators. Fixed and random effect models were applied for static analyses, while the Generalized Moments Method (GMM), which was developed by Arellano and Bond (1991), was applied for dynamic analysis. The analyses for four pollution indicators (include sulfur oxides-SOx, nitrogen oxides-NOx, carbon oxides-COx and non-methane volatile organic compounds-VOCs) cover the years of 1995-2015 for 31 OECD countries. On the other hand, the analyses for the remaining two pollution indicators (particulates-PM10 and particulates-PM2.5) cover the years of 2000-2015 for 26 OECD countries. The results indicate that trade liberalization in OECD countries has negative and statistically significant effects on environmental pollution. This demonstrates the importance of environmental quality and regulations for OECD citizens whose income level is relatively high