Environmental Kuznets Curve and trade liberalization

This thesis investigates the potential effects of trade liberalization on the functional relationship between pollution and income, namely the Environmental Kuznets Curve, for a sample of 52 developing countries. Using GDP per capita as a measure of income and CO2 emissions per capita as a measure of pollution, this study shows that trade liberalization has a signicant effect on the hypothesized relationship. Our results indicate that pre-liberalization period is characterized by a linear relationship. However, trade liberalization does not induce the pattern towards an inverted U-shaped relation. Instead, it accelerates income driven pollution. This finding is in line with the pollution haven hypothesis which claims that trade liberalization can be a trigerring factor in the relocation of the dirty industries via foreign direct investment (FDI) from the developed countries to the developing countries where the environmental standards are relatively less strict