Linking trade openness to load capacity factor: The threshold effects of natural resource rent and corruption control

Abstract

Trade openness (TRA) can have a major impact on pollution levels in developing countries through a variety of mechanisms, including control of corruption and natural resource rent. To address this issue, this study built a panel data threshold regression model focusing on 96 developing countries worldwide between the years 2000 and 2018 and used the load capacity factor (LCF) as an environmental quality assessment indicator to analyze the threshold effects of TRA on environmental quality in the countries in question. The findings indicate that TRA has a significant threshold effect on environmental quality in developing countries. This means that the effect of TRA on the LCF displays a U-shape. Higher natural resource rents have a positive effect on improving ecological quality through TRA, while higher levels of corruption control are associated with a stronger effect of TRA on pollution reduction. In light of these outcomes, several policy implications have been suggested. (a) The country's natural resource base should be fully considered in the development of TRA. (b) In order to curb environmental degradation and promote economic development, governments need to strengthen their efforts to combat corruption.