Toxic trade and environmental stringency: Exploring the impact on economic growth in the G20

Abstract

This study investigates the impact of trade on environment and economic growth in G20 countries from 1990 to 2019, for environmentally sensitive goods (ESGs). Traditional and modern approach of hypothesizing Environmental Kuznets Curve (EKC), are employed. Cross-Sectional-Autoregressive-Distributed Lag (CS-ARDL) model is used to determine short-run and long-run cointegration between environment, growth and trade variables. To analyze the asymmetric impacts of environmental stringency on carbon emissions, Nonlinear Autoregressive Distributed Lag (NARDL) model is used.The results demonstrate that trade-induced EKC of ESGs for G20 is inverted-U shaped. Further, the study shows that trade-induced economic growth results in higher carbon emission, but mitigates environmental degradation at an early stage. Stringency has asymmetric effects on carbon emission, as observed from the findings.Given the controversial nature of research on the environmental impact of trade, particularly with respect to environmentally sensitive items, the present study is unique in terms of selecting the research topic and adds specific value to the literature in comparing the relationship between economic growth and environmental quality, with and without-trade, of toxic product. Moreover, the study highlights the importance of an asymmetrical analysis of the relationship between legislative strictness and environmental degradation from a policy-making perspective of G20.