No Access

Environmental Effects of Trade Liberalization–Evidence from China’s Pilot Free Trade Zone

Lianghu Wang

https://orcid.org/0000-0002-9059-1777

School of Economics and Management, Southeast University, Nanjing 211189, P. R. China

E-mail Address: 230208754@seu.edu.cn

Search for more papers by this author

Zhao Wang

School of Economics and Management, Southwest University, Chongqing 400715, P. R. China

Search for more papers by this author

, and

Yatian Ma

School of Economics and Management, Southwest University, Chongqing 400715, P. R. China

Search for more papers by this author

https://doi.org/10.1142/S1793993321500137Cited by:13 (Source: Crossref)

Abstract

Free trade zone (FTZ) in China has been demonstrating remarkable achievements since its establishment, yet its effects on the environment in the zones cannot be ignored. However, there is still a lack of research on the impact of the quasi-natural experiment in the China pilot FTZ on China’s environment. Based on this, this paper uses panel data from 196 cities in China from 2010 to 2017 and uses the propensity score matching and difference in difference (PSM-DID) model to empirically test the environmental effects of the establishment of the FTZ. The result shows that there is an obvious causal relationship between the establishment of the FTZ and environmental quality. The establishment of the FTZ has exacerbated the environmental pollution problem in the pilot zone. Through a series of robustness tests, it is concluded that the estimated results of the benchmark model are robust. However, after a further study on whether the effect of the FTZ on environment is time varying, it was found that the effects of the FTZ on the environmental pollution in the test zones gradually weakened over time, which means that with the gradual maturity of China’s free trade pilot zone, the positive effect on environmental improvement will gradually highlight.

Keywords:

References

Albrizio, ST and VZ Kozluk [2017] Environmental policies and productivity growth: Evidence across industries and firms. Journal of Environmental Economics and Management, 81(1), 209–226. Crossref, Google Scholar
Antweiler, WB, R Copeland and MS Taylor [2001] Is free trade good for the environment? American Economic Review, 91(4), 877–908. Crossref, Google Scholar
Asumadu, SS and S Vladimir [2019] Effect of foreign direct investments, economic development and energy consumption on greenhouse gas emissions in developing countries. Science of the Total Environment, 646, 862–871. Crossref, Google Scholar
Baek, J [2015] A panel cointegration analysis of CO₂ emissions, nuclear energy and income in major nuclear generating countries. Applied Energy, 145, 133–138. Crossref, Google Scholar
Baek, J and HS Kim [2011] Trade liberalization, economic growth, energy consumption and the environment: Time series evidence from G-20 economies. East Asian Economic Review, 15(1), 3–32. Crossref, Google Scholar
Cherniwchan, J [2017] Trade liberalization and the environment: Evidence from NAFTA and US manufacturing. Journal of International Economics, 105(3), 130–149. Crossref, Google Scholar
Cheng, J, J Yi and S Dai [2019] Can low-carbon city construction facilitate green growth? Evidence from China’s pilot low-carbon city initiative. Journal of Cleaner Production, 231, 1158–1170. Crossref, Google Scholar
Chichilnisky, G [1994] North-South trade and the global environment. American Economic Review, 84(4), 851–874. Google Scholar
Copeland, BR and TM Scott [1994] North–South trade and the environment. The Quarterly Journal of Economics, 109(3), 755–787. Crossref, Google Scholar
Elliott, RJ and Y Zhou [2013] Environmental regulation induced foreign direct investment. Environmental and Resource Economics, 55(1), 141–158. Crossref, Google Scholar
Esty, DC and A Dua [1997] Sustaining the Asia Pacific Miracle: Environmental protection and economic integration. Peterson Institute Press All Books, 3(1), 150–152. Google Scholar
Grossman, GM and AB Krueger (1991). Environmental impact of a north free trade agreement. NBER Working Paper No. 3914. Google Scholar
Grossman, GM and AB Krueger [1995] Economic growth and the environment. Quarterly Journal of Economics, 110(2), 353–377. Crossref, Google Scholar
Hao, Y and YM Liu [2016] The influential factors of urban PM 2.5 concentrations in China: A spatial econometric analysis. Journal of Cleaner Production, 112, 1443–1453. Crossref, Google Scholar
Hao, YZ and CX Liu [2008] Reasons for the setback of the Doha round negotiations of the world trade organization and their enlightenment. China Circulation Economy, 3, 60–63. Google Scholar
He, LY and L Wang [2019] Import liberalization of intermediates and environment: Empirical evidence from Chinese manufacturing. Sustainability, 11, 2579. Crossref, Google Scholar
Heckman, J [1976] The common structure of statistical models of truncation, sample selection and limited dependent variables and a simple estimator for such models. NBER Chapters, 5(4), 475–492. Google Scholar
Hettige, H and LD Wheeler [1992] The toxic intensity of industrial production: Global patterns, trends, and trade policy. American Economic Review, 82(2), 478–481. Google Scholar
Hong, L and XF Lv [2017] Trade liberalization, north south heterogeneity and strategic environmental policy. World Economy, 7, 80–103. Google Scholar
Hu, J, Wang, Z and Y Lian [2018] Environmental regulation, foreign direct investment and green technological progress: Evidence from Chinese manufacturing industries. International Journal of Environmental Research & Public Health, 15(2), 221–233. Crossref, Google Scholar
Huang, MJ and Y Wang [2013] The effect of mandatory CSR disclosure on information asymmetry: Evidence from a quasi-natural experiment in China. Social Science Electronic Publishing, 33(5), 1–17. Google Scholar
Huang, JB, D Du and QZ Tao [2017] An analysis of technological factors and energy intensity in China. Energy Policy, 109, 1–9. Crossref, Google Scholar
Javorcik, BS and SJ Wei [2005] Pollution havens and foreign direct investment: Dirty secret or popular myth? Contributions in Economic Analysis & Policy, 3(2), 1244. Google Scholar
Jena, PR , [2018] Does trade liberalization create more pollution? Evidence from a panel regression analysis across the states of India. Environmental Economics and Policy Studies, 20(4), 861–877. Crossref, Google Scholar
Jeffrey, A and SE Petra [2005] Does matching overcome LaLonde”s Critique of nonexperimental estimators? Journal of Econometrics, 125, 305–353. Crossref, Google Scholar
Kreickemeier, U and PM Richter [2014] Trade and the environment: The role of firm heterogeneity. Review of International Economics, 2, 209–225. Crossref, Google Scholar
Li, KM, LT Fang and LR He [2019] How population and energy price affect China’s environmental pollution? Energy Policy, 129, 386–396. Crossref, Google Scholar
Li, YB [2011] Environment effects of trade liberalization: A literature review. Journal of Capital University of Economics & Business, 1, 121–128. Google Scholar
Lin, FQ [2017] Trade openness and air pollution: City-level empirical evidence from China. China Economic Review, 45, 78–88. Crossref, Google Scholar
Mclaren, D [1992] Compact or dispersed? Dilution is no solution. Built Environment, 18(4), 268–284. Google Scholar
Mielnik, O and J Goldemberg [2002] Foreign direct investment and decoupling between energy and gross domestic product in developing countries. Energy Policy, 30(2), 87–89. Crossref, Google Scholar
Mongelli, I, G Tassielli and B Notarnicola [2006] Global warming agreements, international trade and energy carbon embodiments: An input-output approach to the Italian case. Energy Policy, 34(1), 88–100. Crossref, Google Scholar
Moffitt, R [1991] Program evaluation with nonexperimental data. Evaluation Review, 15(3), 291–314. Crossref, Google Scholar
Nina, P [2002] Trade liberalization, exit, and productivity improvements: Evidence from clean plants. The Review of Economic Studies, 69(1), 245–276. Crossref, Google Scholar
Orley, A and C David [1984] Using the longitudinal structure of earnings to estimate the effect of training programs. Review of Economics & Statistics, 67(4), 648–660. Google Scholar
Pucher, J [1990] Cities and automobile dependence: An international sourcebook. Transportation Research Part A General, 24(4), 35–49. Crossref, Google Scholar
Qiu, S, Z Wang and S Liu [2021] The policy outcomes of low-carbon city construction on urban green development: Evidence from a quasi-natural experiment conducted in China. Sustainable Cities and Society, 309, 102699. Crossref, Google Scholar
Ren, SG, BL Yuan and X Ma [2014] International trade, FDI (foreign direct investment) and embodied CO2 emissions: A case study of Chinas industrial sectors. China Economic Review, 28, 123–134. Crossref, Google Scholar
Ropke, I [1994] Trade, development and sustainability: A critical assessment of the free trade dogma. Ecological Economics, 9(1), 1–22. Google Scholar
Rosenbaum, P and DB Rubin [1983] The central role of the propensity score in observation studies for causal effect. Biometrika, 70(1), 41–55. Crossref, Google Scholar
Rui, X and Z Guomei [2016] Investigating the environment effect of China’s foreign trade in perspective of GMRIO model. The Journal of Quantitative & Technical Economics, 5, 85–103. Google Scholar
Song, M, X Zhao and Y Shang [2020] The impact of low-carbon city construction on ecological efficiency: Empirical evidence from quasi-natural experiments. Resources, Conservation and Recycling, 157, 104777. Crossref, Google Scholar
Taylor, SM [2005] Unbundling the pollution haven hypothesis. Advances in Economic Analysis & Policy, 3(2), 1–28. Crossref, Google Scholar
Tong, JD [2018] Discussion on deepening reform of China pilot free trade zone and construction of free trade port. International Trade, 4, 16–19. Google Scholar
Trefler, D [2004] The long and short of the Canada-U.S. free trade agreement. American Economic Review, 94(4), 870–895. Crossref, Google Scholar
Wagner, UJ and CD Timmins [2009] Agglomeration effects in foreign direct investment and the pollution haven hypothesis. Environmental & Resource Economics, 43(2), 231–256. Crossref, Google Scholar
Wang, Y and N Shen [2016] Environmental regulation and environmental productivity: The case of China. Renewable & Sustainable Energy Reviews, 62(9), 758–766. Crossref, Google Scholar
Yang, XY, P Jiang and Y Pan [2020] Does China’s carbon emission trading policy have an employment double dividend and a Porter effect? Energy Policy, 142, 111492. Crossref, Google Scholar
Yu, B [2015] Economic growth effect of industrial structure adjustment and productivity enhancement: Analysis based on China’s urban dynamic space panel. China Industrial Economy, 12, 83–98. Google Scholar
Zhang, LZ, T Zhu and MH Li [2003] Analysis of the impact of trade liberalization on China’s environmental pollution. Nankai Economic Research, 3, 3–5+30. Google Scholar
Zhang, M, X Sun and W Wang [2020] Study on the effect of environmental regulations and industrial structure on haze pollution in China from the dual perspective of independence and linkage. Journal of Cleaner Production, 256, 120748. Crossref, Google Scholar
Zhang, YG [2009] Energy and environmental costs of China’s trade growth. Journal of Quantitative & Technical Economics, 1, 16–30. Google Scholar
Zhang, YJ, YL Peng and CQ Ma [2017] Can environmental innovation facilitate carbon emissions reduction? Evidence from China. Energy Policy, 100(1), 18–28. Crossref, Google Scholar
Zhu, HG and QJ Qi [2008] Study on the interaction between China’s export trade and environmental pollution: An empirical analysis based on generalized impulse response function. International Trade Issues, 5, 82–88. Google Scholar
Zugravu, S and Natalia [2017] How does foreign direct investment affect pollution? Toward a better understanding of the direct and conditional effects. Environmental and Resource Economics, 66(2), 293–338. Crossref, Google Scholar