What control variables are useful to have for international trade and environmental regulation? ?
I am doing a report on whether environmental regulation has an effect on international trade, using a difference-in-differences method, looking at the EU Industrial Emissions Directive. I'm using the UK and Australia as my treatment and control groups respectively. However, I am unsure as to which control variables I should have in my equation. So far I have CPI and capital intensity. Does anyone have any suggestions as to which variables should be included to isolate the effects of the regulation on trade?
- OiyLv 51 month agoFavorite Answer
CPI and capital intensity cannot be control variables. They are mostly endogenous variables. Control variables such as Pigouvian taxes, a blacklist of an environmental violation, carbon trade quota, etc should be used.