Is liberalization of trade good for the environment? Evidence from India

Abstract

The present paper aims at testing both hypotheses, PHH and FEH, for India’s trade with the rest of the world and the European Union (15) during the 1990s when radical economic reforms were introduced. The input-output method is used and suitably modified to test both the hypotheses considering three pollutants, carbon dioxide, sulphur dioxide and nitrogen dioxide (CO 2 , SO 2 and NO x ). It is clear from the results that import-related pollution is much greater than the export-related pollution for India. The findings of the present work challenge the pollution haven hypothesis, arguing that liberalization of trade policy in India has not been associated with pollution-intensive industrial development. On the other hand, the study supports the factor