Trade liberalization and haze pollution: Evidence from China

Abstract This paper investigates the impacts of trade liberalization on haze pollution using the panel data for 279 Chinese prefecture-level cities during 2007–2016. The relationship of trade liberalization and haze pollution in China was firstly analyzed by using the impulse response function and forecast-error variance decomposition method based on a bivariate vector autoregression model. The results show that trade liberalization is negatively correlated with haze pollution, and the contribution of trade liberalization to the variance of haze pollution exceeds 70% over time. The impact of trade liberalization on haze pollution is further examined applying the two-way fixed effect methods and spatial lag models, concluding that the liberalization of trade has significantly reduced haze pollution. Through mediation effect method, we have found that the haze reduction effect of trade liberalization lies in that the positive influence of technology effect on reducing haze pollution has exceeded the negative influence of scale effect and composition effect on increasing haze pollution. Therefore, in general, trade liberalization has remarkably mitigated haze pollution. The conclusions of this paper will provide a reference for the haze pollution reduction policies and the coordinated development of economic growth and environmental quality.