Tracing the trade–pollution nexus in global value chains: evidence from air pollution indicators

Abstract

Global trade plays an imperative role in the world economy that yields environmental degradation. Therefore, the current paper's ambitions are to explore the trade–air pollution nexuses by introducing the value-added trade (VT) concept from a global value chain stance. The value-added trade (VT) indicator is constructed by the World Input-Output (WIOD) classifications database. Owing to scanty data accessibility, the sample set is reduced to 39 countries covering the period from 1995 to 2009. Furthermore, this paper is also contributing by including the eight different pathways of per capita air pollution in terms of ammonia (NH3), carbon monoxide (CO), carbon dioxide (CO₂), methane (CH₄), nitrogen oxides (NO_x), nitrous oxide (N₂O), sulphur oxides (SO_x) and non-methane volatile organic compounds (NMVOC) respectively. The valuable outcomes from empirical analysis have been found; Firstly, it explores that the preliminary stage of the development of value-added trade (VT) has a positive impact on air-bonds pollution. However, in the later stage of the economic development, trade improves the environmental quality as the square of value-added trade (VT²) has a negative impact on air pollution. Moreover, it also elaborates that the magnitude impact of trade on carbon monoxide (CO) air pollution is more than the other seven air pollutants. Thirdly, the inverted U-shape in the trade–air pollution Environmental Kuznets Curve (EKC) hypothesis, the non-linear relationship between trade and pollution is also validated in all eight air pollutants indicators. Policy proposals for green economy that underlines the global value chain stance and environmental factors in the growing economy are proposed.

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