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Analysis of the Effects of Trade and Investment on the Environment: with Special Reference to the Technique Effect on Su

Kiyoshi MASUMOTO （Graduate School of Asia-Pacific Studies, Waseda University）

Abstract:
While there was a serious concern that the expansion of trade and investment may lead to environmental degradation, most previous studies have indicated that an increase in trade would actually improve environmental conditions. This study aims to analyse the effects of trade and investment on the environment, particularly focusing on the main causes by which trade and investment affects the environment when income levels are equal. The explanatory variables include, sulphur dioxide (SO2) emissions as the dependent variable, the ratio of manufacturing imports to GDP, the ratio of energy trade to total primary energy supply (TPES) and the ratios of total trade and foreign direct investment (FDI) to GDP. The results support the assumption that the expansion of trade would benefit the environment when income levels are equal. However, the effects of the spread of cleaner technology, which was considered to be one of the main causes of the so-called technique effect, as well as the effect of FDI were not clearly observed.

Key Word:
trade, investment, sulphur dioxide, air pollution, technique effect, panel data analysis

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