The intensively debated issue of whether trade globalization leads to a race (climb) to the bottom (top) such that environmental policy stringency is loosened (strengthened) is still far from being uncontroversial. This paper provides new empirical evidence from the standpoint of the North (advanced) countries using both the generalized methods of moment (GMM) and GMM quantile estimators for dynamic panel data models. It first investigates the importance of trade partners and finds, in a sample of OECD countries, that increased trade with the South (developing) countries leads to more stringent environmental regulation whereas heightened trade with the North eases environmental regulation. It then examines whether there exist differences across regimes with different extents of stringency in environmental regulation and finds significant regime-specific effects. Specifically, liberalizing trade with the North weakens environmental regulation stringency in a regime with medium stringency but reinforces it in a regime with high and low stringency. Conversely, expanded trade with the South raises environmental regulation stringency in a regime with medium stringency but deteriorates it in a regime with high and low stringency.
Bibliographical noteFunding Information:
Funding: This work was supported by Korea University.
© 2022 by the authors. Licensee MDPI, Basel, Switzerland.
- environmental policy stringency
- quantile effect
ASJC Scopus subject areas
- Computer Science (miscellaneous)
- Environmental Science (miscellaneous)
- Geography, Planning and Development
- Energy Engineering and Power Technology
- Hardware and Architecture
- Management, Monitoring, Policy and Law
- Building and Construction
- Computer Networks and Communications
- Renewable Energy, Sustainability and the Environment