Linkages between Trade, CO2 Emissions and Healthcare Spending in China

Abstract

China has remained top among the carbon dioxide (CO2) emitting countries in the world, while it has a significant contribution to world trade after World Trade Organization (WTO) reforms in China. The dramatic increase in CO2 emissions has been witnessed. This study examines the linkages between trade openness, CO2 emissions, and healthcare expenditures in China using time series data for the period 1990–2017. The study extended a theoretical model by adding healthcare expenditures, CO2 emissions, and trade openness with some constraints. We used simultaneous equation method for the analysis, and the outcomes suggest that trade is significantly affecting the CO2 emissions in the country, resulting in an increase of healthcare expenditures. The government needs reforms and trade policy embodied green energy consumption in the industrial sector, especially in export sector industries. In addition, carbon tax may be an important tool to reduce CO2 emissions and it may compensate the healthcare spending in the country.