Export Quality, Trade, and Environment

Author

Shahroo Malik, Southern Illinois University CarbondaleFollow

Date of Award

5-1-2024

Degree Name

Doctor of Philosophy

Department

Economics

First Advisor

Lahiri, Sajal

Abstract

The first chapter of this dissertation explores the impact of export quality on the exports of a developing and a developed country. We developed a theoretical framework using the two-country oligopolistic model with quality differentials in product. We find that enhancing export quality improves export performance of a country but it reduces domestic trade under certain conditions. In the second chapter, we test the theoretical findings of Chapter 1 empirically, using annual inter-country and intra-country trade data for 142 countries from 1963 to 2014 and by applying the gravity model of trade. We also use IMF’s Export Quality Index and Unit Value of exports to estimate a two-stage gravity model to examine the effects of producer prices and exports quality on both exports and domestic trade. Our empirical findings are consistent with our theoretical predictions. The empirical findings suggest that quality has a positive impact on international trade and a 1% increase in quality leads to an increase in total exports by 1.08%. A 1% increase in quality leads to a fall in intranational trade by 2.69%. The effect of improving export quality on the exports is more pronounced for OECD countries than the non-OECD countries. This study also discusses the policy measures that developing countries should take to compete effectively in the international market and break the cycle of over-reliance on low-quality export goods and achieve higher economic growth.The third chapter explores the impact of export quality on carbon emissions and fossil fuel energy use. We estimated an OLS with fixed effects and conducted a 2SLS analysis using data for 163 countries from 1980–2014. We have found a positiveassociation between export product quality upgrading and fossil fuel consumption for non-OECD member countries and a negative association for OECD member countries. A 1% increase in export quality increases fossil fuel consumption by 0.092% in non-OECD countries and reduces fossil fuel consumption by 1.57% in OECD countries. Similarly, we also found a positive association between export product quality upgrading and carbon emissions for non-OECD member countries and a negative association for OECD countries. A 1% increase in export quality increases carbon emissions by 0.139% in non-OECD countries and reduces carbon emissions by 1.327% in OECD countries. Our results also indicate that the Environmental Kuznets Curve (EKC) hypothesis is valid.