What are the trade effects of environmental provisions in preferential trade agreements?
(2024) NEKH03 20232Department of Economics
- Abstract
- The climate crisis in one of the major challenges of our time. The role of trade in this context is a contested issue, both good and bad effects are plausible. One important question in this context is whether it is possible to increase the chance that trade does not have a negative impact on the environment by including environmental provisions in trade agreements. While this might be possible, it also risks negatively impacting trade, which in itself has important effects such as economic growth and poverty reduction. The limited previous literature suggests that environmental provisions have a negative effect on trade, but there as several possible issues with the empirical strategy used in these previous studies. To begin with, the... (More)
- The climate crisis in one of the major challenges of our time. The role of trade in this context is a contested issue, both good and bad effects are plausible. One important question in this context is whether it is possible to increase the chance that trade does not have a negative impact on the environment by including environmental provisions in trade agreements. While this might be possible, it also risks negatively impacting trade, which in itself has important effects such as economic growth and poverty reduction. The limited previous literature suggests that environmental provisions have a negative effect on trade, but there as several possible issues with the empirical strategy used in these previous studies. To begin with, the previous study uses a theoretically inappropriate estimator, the model used introduces endogeneity, and the model is restrictive and does not allow environmental provisions to have varying effects across sectors. In my thesis, I propose an improved strategy that uses an appropriate estimator (PPML), specifies the model so that the risk of endogeneity is reduced, and lastly improves the fit of the model by controlling for the sectoral level of emissions, as well as allowing dirtier sectors to see a stronger effect than clean sectors. When using this improved empirical strategy, there is no longer a significant effect on trade from environmental provisions. I therefore conclude, contrary to the small previous literature, that there is no robust evidence that environmental provisions negatively affect trade. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9150607
- author
- Malmqvist Thorsell, Rebecca LU
- supervisor
- organization
- course
- NEKH03 20232
- year
- 2024
- type
- M2 - Bachelor Degree
- subject
- keywords
- Environmental Provisions, Preferential Trade Agreements, Gravity Model, Climate Change, Trade
- language
- English
- id
- 9150607
- date added to LUP
- 2024-04-16 09:30:04
- date last changed
- 2024-04-16 09:30:04
@misc{9150607,
abstract = {{The climate crisis in one of the major challenges of our time. The role of trade in this context is a contested issue, both good and bad effects are plausible. One important question in this context is whether it is possible to increase the chance that trade does not have a negative impact on the environment by including environmental provisions in trade agreements. While this might be possible, it also risks negatively impacting trade, which in itself has important effects such as economic growth and poverty reduction. The limited previous literature suggests that environmental provisions have a negative effect on trade, but there as several possible issues with the empirical strategy used in these previous studies. To begin with, the previous study uses a theoretically inappropriate estimator, the model used introduces endogeneity, and the model is restrictive and does not allow environmental provisions to have varying effects across sectors. In my thesis, I propose an improved strategy that uses an appropriate estimator (PPML), specifies the model so that the risk of endogeneity is reduced, and lastly improves the fit of the model by controlling for the sectoral level of emissions, as well as allowing dirtier sectors to see a stronger effect than clean sectors. When using this improved empirical strategy, there is no longer a significant effect on trade from environmental provisions. I therefore conclude, contrary to the small previous literature, that there is no robust evidence that environmental provisions negatively affect trade.}},
author = {{Malmqvist Thorsell, Rebecca}},
language = {{eng}},
note = {{Student Paper}},
title = {{What are the trade effects of environmental provisions in preferential trade agreements?}},
year = {{2024}},
}