International Trade and Environmental Degradation: A Developing World Perspective

We investigate the multifaceted links between sectoral imports and exports, financial growth, energy consumption, GDP, and their ability to affect pollution emissions across 113 developing countries from 1990 to 2020. Using a large dataset, we used both fixed and random effects models to explore the various processes underlying this relationship. A major finding highlights the significant effect that sectoral imports have on the increasing trend of CO2 emissions, shedding light on the individual industries and sectors’ imports responsible for the degradation of the environment. Our study efficiently accommodates country-specific differences and temporal fluctuations by utilizing both country and time-fixed effects as well as random effects models, resulting in a robust and detailed investigation of the relationship. This study provides critical insights into the continuing discussions about sustainable development in poor countries, emphasizing the importance of focused policy actions aimed at decoupling economic growth from environmental impact.