We seek to contribute to the debate over globalization and the environment by asking: What is the effect of trade on a country’s environment, for a given level of GDP? We take specific account of the endogeneity of trade, using exogenous geographic determinants of trade as instrumental variables. We find that trade tends to reduce three measures of air pollution. Statistical significance is high for concentrations of SO2, moderate for NO2, and lacking for particulate matter. While results for other environmental measures are not as encouraging, there is little evidence that trade has a detrimental effect on the environment.

For the last ten years environmentalists and the trade policy community have engaged in a heated debate over the environmental consequences of liberalized trade. The debate was originally fueled by negotiations over the North American Free Trade Agreement and the Uruguay round of GATT negotiations, both of which occurred at a time when concerns over global warming, species extinction and industrial pollution were rising. Recently it has been intensified by the creation of the World Trade Organization (WTO) and proposals for future rounds of trade negotiations. The debate has often been unproductive. It has been hampered by the lack of a common language and also suffered from little recourse to economic theory and empirical evidence. The purpose of this essay is set out what we currently know about the environmental consequences of economic growth and international trade. We critically review both theory and empirical work to answer three basic questions. What do we know about the relationship between international trade, economic growth and the environment? How can this evidence help us evaluate ongoing policy debates? Where do we go from here?

Because the enormous health consequences of its degradation do matter for households, indoor air quality offers a natural setting in which use of household data can avoid difficulties that plague aggregate estimation of income effects that underlie environmental Kuznets curves (EKCs). Such micro-level evidence is new to the literature, and also provides the empirical underpinning for working from household preferences through to voting and the environmental regulations linked to EKCs. Relevant income effects are obtained from Engel curves for the fuel choices that determine indoor air quality. Using the World Bank’s LSMS data set for Pakistan, and in keeping with our household modeling (Pfaff, Chaudhuri and Nye (2001), we estimate ‘traditional ’ and ‘modern ’ fuels-usage regressions and simulate the implied relationship between income and indoor air quality. Under a range of plausible fuel-emissions assumptions, we find a U-shaped relationship.

ABSTRACT: Considerable interest has focused on the possible existence of an environmental Kuznets curve, whereby pollution first increases but later falls with increasing income. Empirical studies have concentrated on a wide spectrum of countries and run into inevitable problems of data comparability and quality. We avoid these problems by looking at seven types of air emissions across the 50 US states and find all seven pollutants decrease with increasing per capita income. We also find strong evidence of heteroscedasticity with respect to the income–emissions relationship: lower-income states display much greater variability in per capita emission levels than higher-income states. Additionally, we look at the best measured of these emissions, air toxics, for the period 1988–94. Using a simple sign test, we find support for the notion that an increase in income is associated with a decrease in per capita emissions. However, the change in emissions appears to be unrelated to the magnitude of the change in income. We do find, though, that the reduction in per capita emissions is increasing both in terms of the 1988 level of per capita emissions and income. Possible implications of these results for the development process are discussed. 1.

Australian Centre for International Agricultural Research (under PN9449) and the World Bank for financial assistance. Will Trade Liberalization Harm the Environment? The Case of Indonesia to 2020

Some good reasons explain why early approaches to identifying agricultures economic roles resulted in a one-way strategic path that involved the flow of resources towards the industrial sector and urban centres. In an effort to provide a more comprehensive view of the roles that agriculture plays in promoting human well-being, FAO initiated the Role of Agriculture Project (ROA) to provide a new approach to poverty alleviation and socioeconomic development. The purpose of this report is to present examples, suggestions, and possible methods and tools on how to document, measure and identify the functions and values of the nontraditional economic roles that agriculture plays in the development process. The report s immediate aim is to provide a basis for discussion during the Economic Roles of Agriculture session at the 19-21 March, consultation in Rome. The intent here is to provoke discussion, rather than to capture all of the issues and details that merit analysis. The paper presents examples to initiate the discussion and allow participants to add substance, refine concepts and alter, delete and adapt the analytical framework as appropriate. Six of the contributions listed in Figure 1 are outlined in some detail. Other examples may be discussed during the consultation together with those suggested by participants. The six examples are agricultures economic contributions: (i) to agribusiness activities not usually considered part of the agricultural sector; (ii) as social welfare infrastructure; (iii) through rapid productivity growth; (iv) to alleviating poverty; (v) to learning and education; and (vi) to healthy and safe food. The remainder of th...

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Recent events such as the NAFTA and the completion of the Uruguay Round have raised concern over the impact of trade liberalization on the environment. In particular, it is believed that less stringent environmental standards in developing countries will give them a comparative advantage in pollutionintensive goods. Using single equation models, existing empirical studies have found either no relationship between environment and trade flows, or a positive relationship between trade liberalization and the environment. This paper develops a simultaneous-equations model to estimate this relationship, directly incorporating the effects of openness on growth of income, and of income growth on environmental damage. A two-good trade model with endogenous factor supply is estimated using pooled provincial data on Chinese water pollution from 1987-1995. Estimation of this model reveals that trade liberalization directly aggravates environmental damage via its influence on the terms of trade, but indirectly mitigates it via its effect on income growth. Simulations suggest that trade reform during the period may have had a net beneficial impact on emissions growth.

Globalization of trade and finance has gone a long way over the last half-century. But it is less impressive than most non-economists think, judged either by the standard of 100 years ago or by the hypothetical standard of perfect international integration. The paper documents the extent of globalization, and some reasons for the barriers that remains. It then briefly considers the implications for economic growth and the implications for goals not measured by GDP -- equality and the environment. The conclusion is that globalization is not the primary obstacle to efforts to address such concerns. Jeffrey Frankel Kennedy School of Government 79 JFK Street Harvard University Cambridge MA 02140 (617) 496-3834 jeffrey_frankel@harvard.edu This paper was written to be a concise survey on globalization for a non-specialist audience. It is forthcoming in Governance in a Globalizing World, edited by Joseph Nye and John Donahue, Brookings Institution Press. The author would like to thank for com...

this paper offers a brief intuitive explanation of the effect omitting the form of government might have on the turning point in estimated environmental Kuznets curves. Relevant literature on this subject is then surveyed and a preliminary model of pollution control 5