The environmental effects of regional economic cooperation: Evidence from the Belt and Road Initiative

Abstract

China’s Belt and Road Initiative is a significant regional economic cooperation. This paper uses the Belt and Road Initiative (BRI) as a quasi-natural experiment to investigate the impact of regional economic cooperation on environmental quality. Using difference-in-differences (DID) and a series of robustness checks, we find that regional economic cooperation like BRI deteriorates environmental quality in countries along the Belt and Road. The main reason is that the improving effects on environmental quality in the BRI countries are smaller than in the non-BRI countries after the BRI. The ecological impacts of the BRI exist differences in different countries. The results show that the BRI improves environmental quality in South Asia, and Europe and Central Asia. However, the BRI negatively affects environmental quality in East Asia and Pacific, developing and non-OECD countries. We found that, unlike the BRI, the Green BRI improves environmental quality in countries along the Belt and Road. We also discuss the mechanism of the BRI on environmental quality from foreign direct investment (FDI).