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How do technology-oriented tax incentives affect corporate pollution emissions? Evidence from China's Tax Reduction for Advanced Technology Imports

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  • Feng, Meile
  • Deng, Xinghua
  • Liu, Xiaoqian
  • Chen, Lingqing

Abstract

Technology imports, as a driver of technological progress, play a vital role in enhancing environmental management in developing countries. Leveraging China's Tax Reduction for Advanced Technology Imports (TRATI) policy as an exogenous shock, and employing firm data from 2000 to 2013, this study investigates the environmental effect of TRATI policy using a difference-in-differences approach. Mechanism analysis indicates that corporate emission abatement is primarily driven by green technology upgrading and the alleviation of financial constraints, rather than by output reduction or pollution offshoring. Furthermore, heterogeneity results reveal that the reduction effects of this policy are notably pronounced in state-owned, exporting, mature firms, and firms located in cleaner industries, non-emission trading pilot areas, and regions with weaker regulatory enforcement. These findings provide critical implications for developing countries, highlighting the role of technology imports in achieving a sustainable balance between economic development and environmental protection.

Suggested Citation

  • Feng, Meile & Deng, Xinghua & Liu, Xiaoqian & Chen, Lingqing, 2026. "How do technology-oriented tax incentives affect corporate pollution emissions? Evidence from China's Tax Reduction for Advanced Technology Imports," Economic Modelling, Elsevier, vol. 154(C).
    • Handle: RePEc:eee:ecmode:v:154:y:2026:i:c:s0264999325003608
    DOI: 10.1016/j.econmod.2025.107365
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