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Induced clean technology adoption and international trade with heterogeneous firms

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  • Jingbo Cui

Abstract

This paper introduces an environmental externality and factor-biased technology adoption into a trade model with heterogeneous firms. This study explores how firms’ decisions of technology adoption and of exports are affected by openness to trade and the stringency of environmental regulations. It shows that: (1) these decisions induced by tightened environmental policies depend upon whether the upgraded technology is labor-biased or emission-biased; (2) the environmental impact of trade cost reductions on the aggregate emissions and price of emissions permits varies with the factor-biased feature; and (3) regardless of the factor-biased feature, the trade cost reduction induces firms to export and to upgrade the factor-biased technology, while it forces the least productive firms to exit the market. Moreover, the model is further calibrated to simulate policy scenarios of bilateral and unilateral variations in trade variable costs and environmental policies. The bilateral reduction of emissions cap may contribute to welfare gains in both home and foreign countries. The unilateral action of tightening environmental policy in the home country may hurt the home country, but makes the foreign country better off.

Suggested Citation

  • Jingbo Cui, 2017. "Induced clean technology adoption and international trade with heterogeneous firms," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 26(8), pages 924-954, November.
    • Handle: RePEc:taf:jitecd:v:26:y:2017:i:8:p:924-954
    DOI: 10.1080/09638199.2017.1320579
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    References listed on IDEAS

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    1. Arik Levinson, 2015. "A Direct Estimate of the Technique Effect: Changes in the Pollution Intensity of US Manufacturing, 1990-2008," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 2(1), pages 43-56.
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    Cited by:

    1. Xixuan Guo & Kaixiang Huang & Lanyu Li & Xiaonan Wang, 2022. "Renewable Energy for Balancing Carbon Emissions and Reducing Carbon Transfer under Global Value Chains: A Way Forward," Sustainability, MDPI, vol. 15(1), pages 1-17, December.
    2. Liming Hong & Wei Huang & Sajid Anwar & Xiaofeng Lv, 2023. "North–South asymmetry, unilateral environmental policy and carbon tariffs," Pacific Economic Review, Wiley Blackwell, vol. 28(2), pages 241-266, May.
    3. Ling-Yun He & Liang Wang, 2019. "Import Liberalization of Intermediates and Environment: Empirical Evidence from Chinese Manufacturing," Sustainability, MDPI, vol. 11(9), pages 1-15, May.
    4. Cui, Jingbo & Ji, Yongjie, 2011. "The Environment, Trade and Innovation with Heterogeneous Firms: A Numerical Analysis," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103478, Agricultural and Applied Economics Association.
    5. Jevan Cherniwchan & Brian R. Copeland & M. Scott Taylor, 2017. "Trade and the Environment: New Methods, Measurements, and Results," Annual Review of Economics, Annual Reviews, vol. 9(1), pages 59-85, September.
    6. Etienne Inedit Blaise Tsomb Tsomb & Henri Ondoa Atangana, 2023. "Multilateral environmental agreements and the growth of total factor productivity in developing countries: evidence from the foreign direct investment channel," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(11), pages 12965-12997, November.
    7. Li, Haoyang & Wu, Nan, 2022. "Emission pricing, emission rebound, and the coverage scope of incomplete regulations," Journal of Environmental Economics and Management, Elsevier, vol. 113(C).
    8. Zhang, Yan & Cui, Jingbo & Lu, Chenghao, 2020. "Does environmental regulation affect firm exports? Evidence from wastewater discharge standard in China," China Economic Review, Elsevier, vol. 61(C).
    9. Hamaguchi, Yoshihiro, 2023. "Environmental tax evasion as a determinant of the Porter and pollution haven hypotheses in a corrupt political system," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 610-633.
    10. Fethi Amri, 2019. "Renewable and non-renewable energy and trade into developed and developing countries," Quality & Quantity: International Journal of Methodology, Springer, vol. 53(1), pages 377-387, January.

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