Trade Expansion, Governance and Environmental Degradation New Evidence from Africa and Asia
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Abstract
The purpose of this study is to examine how trade expansion and governance influence the quality of our environment in selected countries in Sub-Saharan Africa and Asia where environmental poverty appears to be alarmingly high. As globalization propelled by technology and digitalization disrupt trade barriers across nations, regions, and continents, some of its consequences are the race to the bottom and pollution haven. We used panel data for 26 African and Asian countries based on Grossman and Krueger’s model to regress carbon emission on trade, governance, foreign direct investment, and gross domestic product for the period 1996 to 2021 due to consistent data availability. We employed the panel autoregressive distributed lag modeling estimator to obtain the following results. First, both regions, we established that the influence of trade on environmental quality is significantly mediated by the quality of governance. Emphatically, the interactive effects of governance indicator and trade are negative and statistically significant in the long run for Africa. This result is worrisome as it justifies that Africa remains a pollution haven and her governance quality is weak. Second, in the short run, while environmental quality is adversely impacted by trading activities, governance quality appears to not matter in its interactions with trade on environmental quality. So, we concluded that the interactive role of governance in trade-environment nexus is a long run concerns as against a short run consideration.
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