The Kyoto Protocol, Competitiveness, and International Trade: A View through the Lens of a Geographically Weighted Regression Study

Purpose - The Kyoto Protocol imposes greenhouse gas emission ceilings on developed countries. However, on account of there being different reduction targets and conditions, a loss of competitiveness is expected among developed countries. The main objective of this study is to examine the impact of the Kyoto Protocol on international trade. Design/Methodology/Approach - Geographically Weighted Regression (GWR) allows the coefficients of explanatory variables to differ by locality by assigning relatively more weight to geographically close observations. By studying the spatial patterns this paper investigates whether the competitiveness is observed or not. Findings - GWR results show that while a loss of competitiveness can be observed among non-European developed countries (i.e., Canada, the United States, Japan, and New Zealand), no loss of competitiveness is clearly seen in the European Union. Research Implications - The results based on the global gravity model indicate that there is no clearly observable loss of competitiveness among developed countries, but the spatial pattern shows the loss of competitiveness across regions. The results imply that spatial patterns need to be considered in international trade.