Impact of Trade Liberalization on Environment Pollution in Iran

Liberalization of international markets affects level of pollution in developing countries more than in developed countries. Therefore the impact of trade liberalization on environmental pollution is a challenge for policy makers. In this paper Auto Regressive Distributed Lags (ARDL) and Error Correction Model (ECM) methods are employed for a study of the relationship between trade liberalization and environmental pollution in Iran, in the long run as well as in the short run. Results indicate that pollution is negatively related to trade intensity and openness, while capital to labor ratio and Gross Domestic Product (GDP) are positively related to pollution. Results also show that trade liberalization in the long run can solve environmental problems. At last, the paper analyzes the Environmental Kuznets Curve as regards Iranian economies.