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Does trade matter for environmental degradation in developing countries? New evidence in the context of export product diversification

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Global warming is a serious problem facing the world today. To minimize it, scholars are trying to find the reasons behind increasing CO2 emissions. This study examines the effects of overall export product diversification, extensive margin, and intensive margin on CO2 emissions as indicators of environmental degradation in 84 developing countries for the period of 1971–2014 in the context of the environmental Kuznets curve (EKC) hypothesis using three estimators, namely, autoregressive distributed lag (ARDL) bounds test, dynamic ordinary least squares (DOLS), and fully modified ordinary least squares (FMOLS). The empirical findings reveal that EKC hypothesis is valid. The overall empirical findings from various approaches show that overall diversification, extensive margin, and intensive margin have a positive and significant effect on CO2 emissions.

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  1. 1.

    This income level is estimated around $22,500 by Klinger and Lederman (2006).

  2. 2.

    There are two types of EKC approach in the literature. The first approach (traditional ones) uses GDP and the square of GDP as the independent variables in the model. However, Narayan and Narayan (2010) criticize this approach because of the problem of collinearity or multicollinearity between GDP and the square of GDP in the model. After this criticism, they introduce a “new approach” for EKC in which they exclude the square of GDP. In this approach, only GDP is used as an explanatory variable representing income per capita.

  3. 3.

    A higher value of the Theil index and intensive/extensive margin indicate that the countries’ export basket is low diversified. In other words, in the empirical findings, the negative sign for export product diversification (intensive/extensive margin) means that the effect of export product diversification on CO2 emissions is positive. On the other hand, the positive sign means that the concentration of extensive/intensive margin affects CO2 emissions positively (Gozgor and Can 2016).


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Correspondence to Behnaz Saboori.

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Can, M., Dogan, B. & Saboori, B. Does trade matter for environmental degradation in developing countries? New evidence in the context of export product diversification. Environ Sci Pollut Res (2020). https://doi.org/10.1007/s11356-020-08000-2

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  • Export product diversification
  • Extensive margin
  • Intensive margin
  • Environmental degradation