The relation between environmental pollution and trade: a panel data analysis

Human and environment relations began to change with agricultural revolution at first. This change was followed by the industrial revolution. As a result of the increase in the world's population, production, trade with the industrial revolution, environment has been effected negatively by accelerating the consumption of natural resources. Some of the factors such as industrialization, rapid population growth and excessive consumption of natural resources has been caused environmental pollution. In this context, this paper explains the dilemma between environmental pollution and trade for various countries with different income levels. This study aims to analyze the relationship between environment, economic growth and Trade Openness Rate. For this reason, CO2 emissions per capita, GDP and Trade Openness Rate have been used for the period from 1960 to 2010. The data has been obtained from the World Bank and analyzed by the Panel Data Method. To conclude, Trade Openness Rate of developed countries has a negative effect on the level of CO2 emission while Trade Openness Rate of developing and less developed countries has positive effect. The results may be evidence that the Pollution Haven Hypothesis is still valid for the developing and/or less developed countries.