Impact of Trade Inequality on Environmental Quality: A Global Assessment

Abstract

The interaction between environmental degradation and economic growth is a growing matter of interest among policymakers, and in the era of globalized economy, trade openness plays a significant role in determining the economic growth of nations. Given this context, this paper examines the impact of inequality in trade volume on CO2 emissions, following environmental Kuznets curve (EKC) hypothesis, for 187 countries and over the period of 1990–2017. In terms of methodology, this study has employed Generalized Method of Moments (GMM) and Geweke (J Am Stat Assoc 77:304–313, [22]) causality analysis, while checking for the cross-sectional dependence. The study has been carried out on both aggregate and disaggregated dataset. Disaggregation of the dataset has been done based on the income levels (low, middle, and high) and continents (Asia, Europe, North America, South America, Oceania, and Africa). This study has found the evidence of N-shaped EKC for both the aggregate and disaggregated dataset. The impacts of inequality in trade volume and globalization differ in accordance with the level of development of the nations under consideration.