STATE MANAGEMENT EFFICIENCY, TRADE OPENNESS, AND SUSTAINABLE DEVELOPMENT: A DYNAMIC BAYESIAN PERSPECTIVE
DOI:
https://doi.org/10.18623/rvd.v22.n6.3998Keywords:
Trade Openness, Government Effectiveness, Sustainable DevelopmentAbstract
This study examines the relationship between trade openness and sustainable development, with particular emphasis on the conditioning role of government effectiveness. Using a cross-country dataset covering the period 2005–2023, the study employs a Bayesian regression framework to address parameter uncertainty and cross-country heterogeneity. Sustainable development is measured by the Sustainable Development Goal Index (SDGI), while trade openness is proxied by the ratio of total exports and imports to GDP, and government effectiveness reflects state management efficiency. The empirical findings indicate that trade openness, when considered in isolation, has a negative impact on sustainable development, suggesting that increased trade integration may intensify environmental degradation and social pressures in the absence of adequate governance. Government effectiveness also exhibits a negative standalone effect, implying that improvements in administrative efficiency do not automatically translate into sustainability gains when policy priorities remain predominantly growth oriented. In contrast, the interaction between trade openness and government effectiveness exerts a positive and robust effect on sustainable development. This result demonstrates that effective state management plays a crucial role in internalizing trade related externalities and aligning economic integration with environmental and social objectives. Overall, the study highlights that trade openness is neither inherently beneficial nor detrimental to sustainable development. Its impact critically depends on government effectiveness, underscoring the importance of strengthening state capacity to harness the sustainability benefits of trade liberalization.
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