Inter-Industrial Trade on Iran's Air Pollution

Maryam Asghari, Mohamad Hosein Mohamadi
2016 Open Journal of Ecology  
The related issues to trade liberalization and its impact on the environmental quality have become important since late 1996. The previous studies have shown that there has not been consensus among the economists in this field. Paper is analyzing the effect of inter-industrial trade on the Iran's air pollution. Also in this paper, the pollution haven hypothesis is tested in Iran. To study the effect of inter-industrial trade on the environment in two ways: 1) direct effect on the environment
more » ... the environment and 2) an indirect effect through growth and the effect of growth on the environment were examined. The model has been estimated by using the panel data method for Iran's various industrial sectors over 1980-2014. The results show that inter-industrial trade has positive effect on Iran's air pollution. Also, pollution haven hypothesis is valid in Iran. 278 mulates economic activity and that quality of environment is deteriorated if the techniques of production are unchanged. They suppose that if quality of environment is a normal good then firms in developing countries move towards lower standard of production due to relax rules and regulations of environment. This process may raise distribution of income at world level; trade openness favors growth of pollution-intensive industries in case of developing countries as developed countries enforce strict environmental regulations, thereby having a significant adverse effect on environmental quality [2] [3] . Grossman and Krueger [4] emphasize the role of international trade on the environment and decompose the effects of trade openness into three separate mechanisms as follows: scale, technique, and composition effects. The scale effect refers to an increase in pollution emissions resulting from economic expansion by trade openness. The technique effect refers to a reduction in pollution emissions due to the demand for stricter environmental regulations with rising income. The composition effect refers to a change in the industrial structure through trade openness. In particular, the pollution haven hypothesis (PHH), which asserts that dirtier industries move from developed countries to developing countries, remains controversial. Since the conjunction of differences in environmental policies and in the determinants of trade across countries may lead to the migration of "dirty" industries to countries with emission-intensive production techniques, the rapid growth of world trade has given fuel to the alarmists who claim that trade is bad for the environment, and to a large and still unsettled debate about the pollution haven hypothesis. Suspicions about the validity of the PHH have recently been echoed in doubts about the existence of an EKC. The aim of this study is to examine the effect of trade openness on Iran's CO 2 emissions. As an individual country, level of income as well as the composition of traded commodities, level of emissions intensity, can give better understanding about the effect of trade openness on CO 2 emissions [5] . This study is a healthy contribution towards respective literature by four folds: 1) it is studying the indirect relationship between trade openness and CO 2 emissions through economic growth; 2) it is pioneering effort investigating the direct relationship between trade openness and CO 2 emissions by adding scale, technique, composite and comparative advantage effects in CO 2 emissions function; 3) the bounds testing approach is applied for checking the presence of pollution haven hypothesis.
doi:10.4236/oje.2016.66028 fatcat:cecnhzmkgfceppivhxed3rarle