Local environmental constraints and firms’ export product quality: Evidence from China

This study explores how local environmental constraints (LECs) regarding the disclosure of emissions reduction targets affect firms' export product quality. Previous studies generally focus on top-down environmental policies, neglecting the impact of local governments' responses to such policies on firms. Employing data from Chinese manufacturing firms from 2002 to 2009, we find that LECs lead to a 3.57% reduction in firms' export product quality. Productivity, product-switching activities, and trade credit are possible channels. Further analysis suggests that (1) the negative effect is only significant for non-border firms and is more pronounced in high-emissions industries; (2) the adverse effect is enhanced when mayors are over 54 years old, serve in their hometowns, or have had a long term in their posts; and (3) LECs reduce firms’ export value. Our findings highlight the importance of considering differentiated policy implementation in localities when determining the top-level design of central environmental policies.