The Role of Human Capital, Innovation, and CO2 Intensity in International Trade in Developed Countries

Abstract

With an emphasis on the functions of human capital innovation and CO₂ intensity, the current study empirically examines the factors that influence international trade in a panel of developed economies. Innovation, industrialization, and the human capital index are strong and important factors that support international trade in developed nations, according to the analysis, which uses Pooled Mean Group (PMG) regression. Tariffs and interest rates, on the other hand, have been shown to drastically lower trade activity. Strong long-term equilibrium relationships are indicated by significant error correction terms (ECTs), which further support the model's robustness. Instead of employing broad tariffs, policymakers should invest in innovation, CO₂ mitigation, and targeted subsidies to increase trade. It's also critical to reduce trade barriers and pay attention to how interest rates impact export competitiveness.