Trade openness and pollutant emissions in China: the role of capital abundance and income

The role of capital abundance and income in the trade openness and environmental quality debate has long been a concern among academic researchers. The researchers of this paper empirically analyze the effects of trade and other core factors on emissions of four pollutants (SO₂, SM, VOC, and NH_X), using panel data from 31 provinces in China from 2000 to 2015. Then the scale, composition, technique, and trade elasticities are calculated, based on lower and higher levels of capital abundance and relative income. Furthermore, the researchers calculate the province-specific trade elasticities and analyze the relationship between the province-specific trade elasticities and capital abundance and relative income, respectively. They find a negative effect of trade openness on pollutant emissions in China. The analysis of the elasticities in terms of China's pollutant emissions shows that the scale and composition elasticities are positive, while technique and trade elasticities are negative. Moreover, provinces with lower capital abundance tend to have more negative trade elasticities, while provinces with higher relative income tend to have more negative trade elasticities. The result implies that both pollution haven effect and factor abundance effect may be at work in Chinese provinces, but the dominance of one effect over the other depends on a province's level of capital abundance and income.