Trade Openness and the Environmental Kuznets Curve: Evidence from Cities in the People’s Republic of China | Asian Development Bank

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Trade Openness and the Environmental Kuznets Curve: Evidence from Cities in the People’s Republic of China

Publication | November 2018
Trade Openness and the Environmental Kuznets Curve: Evidence from Cities in the People’s Republic of China

Cities featuring greater openness tend to have lower industrial wastewater emissions but higher sulfur dioxide emissions.

We examine the impact on the environment of economic growth and trade openness in 261 cities in the People’s Republic of China (PRC) over the period 2004–2013, using a newly developed, continuously updated, fully modified method that allows for cross-sectional dependence and endogeneity. We investigate two types of pollutants— industrial wastewater and sulfur dioxide—and employ three measures of openness in the regression. The results show that the environmental Kuznets curve hypothesis holds not only for the whole of the PRC but also for different regions. We estimate that wastewater pollution increases with economic development until the per capita gross domestic product (GDP) reaches the turning point of CNY31,849–CNY49,446 (in constant 2002 prices), which varies depending on the specific measure of trade openness. We find that the turning point for sulfur dioxide occurs at a much lower income level, around CNY9,274–CNY10,103 per capita GDP. Our results also indicate that cities featuring greater openness tend to have lower industrial wastewater emissions but higher sulfur dioxide emissions.

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