Does international trade improve environmental efficiency? An application of a super slacks-based measure of efficiency

This study analyzes the impact of international trade on environmental efficiency. Using a data envelopment analysis (DEA) model that allows us to treat undesirable outputs and super-efficiency beyond unity, we measure the environmental efficiency of four typical air pollutants—SO2, NOx, particulate matter 10 μm or less in diameter, and CO2—for 98 countries for the period 1970–2008. The resulting environmental efficiency is regressed on income, capital-labor ratio, and trade openness. The panel regression results reveal that trade openness is positively correlated to the environmental efficiency. However, the impact of trade openness on environmental efficiency varies across countries depending on their relative per capita income. The estimated results show that the higher the relative income per capita, the more the benefit of trade on the environmental efficiency. © 2015, Honma.