Investigating the impact of trade openness and corruption control index on PM10 in selected countries of three income groups

The traditional approachof economics is based largely on the wasteful use of natural resources and the lack of attention to future generations' rights to these resources. However, the environmental impacts of such an approach will be irreparable and in order to achieve the sustainable development, it has to be changed. Considering the importance of protecting the environment as well as the need to pay more attention to the sustained growth and development, this study, examines the factors affecting air pollution from the economic and institutional perspectives with a greater focus on the two variables: trade openness and the control of corruption index. Researches in the field of environment confirm that there is an inverted U-form relationship between the economic growth and the air pollution. In fact, the Environmental Kuznets Curve (EKC) claims that in the first stage of development, pollution grows rapidly; because the rapid growth results in untapped use of natural resources, and therefore the air pollutants generation increases. But at the high levels of development, people value the healthy environment, more effective environmental regulations will be implemented, regulatory institutions become more effective, the economic structure moves toward clean industries, and finally the pollution level declines. Regarding the role of trade patterns in the transmission of pollution, from high income economies which have stringent environmental standards to the middle and low income economies that place high levels of production and employment as their top priorities, new models have been proposed that can cover the role of trade in the EKC. Two conflicting hypothesis emerge from the debate: the pollution haven hypothesis (PHH) and the factor endowment hypothesis (FEH). According to the pollution haven hypothesis, pollution control policy differences across countries drive pollution-intensive industries to the countries with weaker regulations. Another hypothesis, the factor endowment hypothesis (FEH), predicts that rich and developed countries will specialize in polluting goods. Since the abundance of capital supports the production of more capital goods and polluting industries. On the other hand, countries with a lot of workforce and land tend to be more specialized in less polluting sectors. Studies show that with the entry of commercial variables into the discussion, increasing or decreasing of pollution is different depending on the country and the environmental index which is used. It seems that only the entry of economic variables, is not a solution to the problem, because a growing attention of countries will be given to the condition of pollutants and the need to move toward a sustainable development. As a result, they will face the challenge of complying with environmental regulations. Concurrent importance of economic growth, and reducing poverty and unemployment has made some managers to ignore the neglecting of rules by companies. So they can also obtain benefits for themselves through the rents. In this regard, some recent studies have come up with models that apply the effects of institutional factors. Most of these researches have shown that improving the governance, and in particular controlling the level of financial and administrative corruption, play a crucial role in reducing emissions. However, it seems that the quality of the regulatory institutions that can ensure the correct implementation of environmental regulations is less considered in the existing literature. So, using the Fully Modified Least Squares (FMOLS) approach in selected countries of three income groups from 1996 to 2011, the purpose of this study is to investigate the effects of trade openness and control of corruption on the particulate matter index. Empirical results indicate that the effect of trade openness on air pollution in all three income groups is negative and significant. It means that increasing in trade openness will improve the air quality and reduce PM10 emissions. Furthermore, the empirical findings show that with an increase in control of corruption, there is a significant decrease in PM10 emissions in Middle and Low income groups; while this effect is not statistically significant in high income group. Therefore, reducing the level of corruption and combating of corrupt activities will enhance the air quality in Middle and Low income groups. Since the clean air and healthy environment play an important role in the survival of human beings, the results of this study can lead to policies for the sustainable development.