Trade Liberalization, Energy Consumption and Pollution: An Empirical Investigation of Kuznets’ Hypothesis in 60 Developing Countries

International Journal of Economics and Management Studies
© 2019 by SSRG - IJEMS Journal
Volume 6 Issue 1
Year of Publication : 2019
Authors : Nashipu Thalut and Mark Tata Kelese
: 10.14445/23939125/IJEMS-V6I1P102
MLA Style:

Nashipu Thalut and Mark Tata Kelese, "Trade Liberalization, Energy Consumption and Pollution: An Empirical Investigation of Kuznets’ Hypothesis in 60 Developing Countries" SSRG International Journal of Economics and Management Studies 6.1 (2019): 10-20.

APA Style:

Nashipu Thalut and Mark Tata Kelese,(2019). Trade Liberalization, Energy Consumption and Pollution: An Empirical Investigation of Kuznets’ Hypothesis in 60 Developing Countries. SSRG International Journal of Economics and Management Studies 6(1), 10-20.


This study examined the long run relationship between trade liberalization, energy consumption, income per capita and environmental air quality proxied by carbon dioxide (CO2) emissions in metric tons. Income per capita and income per capita squared were included in the model to capture the Kuznets’ hypothesis. Cross sectional data was obtained from the world development indicators, 2010 spanning over the period 1960 -2004. Both Fixed and Random effects, robust Heteroscadacity estimation techniques were used to investigate the links amongst the variables for 60 developing countries. The result of the findings shows that energy consumption and trade liberalization in both the short and long run have a positive relationship with pollution for less developed countries using the pooled and heteroskedasticity panel corrected standard error estimates. The significance of the positive coefficients of energy consumption and trade liberalization on CO2 emissions suggests that an increase in the level of energy consumption and trade liberalization have unfavourable effects on environmental quality in less developed countries. The results of the study also showed that income has a negative relation with the measure of environmental quality meanwhile income squared has a positive link with CO2 emissions. The coefficient of the squared term of income per capita is positive for the least developing countries suggesting that the countries have not yet reached the threshold income level, where they will tend to give more priority to the protection of the environment. This means that an increase in income will lead to deterioration of the environment. The study recommends that developing countries can open their markets by uplifting tariffs and quotas to encourage trade whlist adopting strong pro-environmental policies.


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Key Words:

Trade Liberalization, Energy Consumption, Pollution, Kuznets’ Hypothesis, Panel Co-integration.