Environmental consequence of Australian agricultural trade: An asymmetric analysis

Abstract

Link between environmental degradation and agricultural trade balance (ATB) is an under investigated issue. This article, therefore, investigates the issue for Australia using the data of 1988–2021. In this investigation when a linear model is applied, support for short‐run impact is revealed. However, linear model is unable to explore the asymmetry of the relationship. Therefore, to assess the asymmetry a nonlinear model is applied. The latter model has supported both short‐ and long‐run asymmetry adjustment by the ATB on Australian pollution. The findings reveal that improvement of the ATB is harmful for Australian environment, and agro import related economic activities are environmentally more efficient than agro export activities. However, to improve the environmental condition, agricultural commodity import substitution is not a viable option for the country. The result also validates the EKC hypothesis, and additionally when environmental pollution is concerned, national income is as important as the ATB of Australia.