The Effect of Trade Openness on Environmental Quality: Evidence from Iran's Trade Relations with the Selected Countries of the Different Blocks

The aim of this paper has been to evaluate the effect of trade openness on the Iran’s environmental quality arising from its trade relations with the selected countries in East Asia, Middle East and OECD over the period 1991-2007. The study emphasizes on the scale, composition and technique effects as a result of the relationship between trade and environment. For the environmental quality, the CO2 data has been used alternatively. This article thus examines such relationship by estimating a panel regression CO2 emission model. The empirical results indicate a positive effect of increasing GPD on pollution of the countries in the first and second blocks. Additionally, the empirical results have shown that Iran could not benefit from its trade incomes with the OECD countries and in the Middle East. Also, due to the estimated positive coefficient of the capital-labor ration in the OECD block, the Iran's comparative advantage has been in dirty products.