Does Trade Openness Transfer Pollution across Borders: An Experience of Pakistan

Abstract

The study aims to empirically explore the link between trade openness and emission level in Pakistan by using Johansson co integration technique during the period from1972 to 2019. The empirical strategy of the study progressively incorporates models from zero interaction terms to complete interaction terms for analyzing the relationship between trade openness and emission level in the presence of scale, composition and technique effect. The variable of the trade openness appeared in all the models with negative sign except in scale effect model. It means technique effect outweighs the composition and scale effect in Pakistan which ultimately makes decreasing impact of trade on pollution. The scale effect results in higher emissions in Pakistan. Similarly, composition effect also bears positive sign showing that higher capital labor ratio in Pakistan will increase pollution because capital goods are said to be pollution intensive goods.