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Spatial Analysis of Environmental Degradation: The Role of International Trade and Democracy
Abstract
This paper explores the drivers of environmental degradation by using spatial panel data models to account for spatial interdependence among countries. Despite a large body of literature investigating the relationship between international trade, democracy, and the environment, previous studies have produced mixed results, partly due to the conceptualizations of variables and methodological limitations. This paper addresses these limitations by proposing alternative measures of trade openness and democracy while accounting for spatial dependence between countries. The results reveal that income, economic complexity, democracy, energy intensity, and agricultural land contribute to CO2 emissions, while forest area is negatively associated with environmental degradation. The results also reveal that while trade openness has statistically significant and positive direct effects, there are strong spillover effects as well. Indeed, the negative spillover effects of trade openness outweigh the direct effects, leading to a mitigating impact on environmental degradation.
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