Relationship Between Trade, Investment and Environment: A Review of Issues

Abstract

The inter-linkage between economic openness and environmental repercussions is a widely researched area. The current study contributes in the existing pool of research by conducting a cross-country empirical analysis for the year 2008 by exploring the interrelationship between openness indicators (trade and investment) and environmental performance of a country. For this purpose, the analysis separately considers export orientation, import orientation, FDI inwardness and FDI outwardness of the countries in different variations of the proposed empirical model. The regression results do not provide strong support to the Pollution Haven Hypothesis (PHH). The findings also confirm a relationship between socio-economic and socio-political factors in a country and its environmental performance.

Keywords: Trade and Environment, International Investment

JEL Classification: F18, F21