The More the Merrier? Evidence from Firm-Level Exports and Environmental Performance in China

Existing literature supports that exporting firms have better environmental performance. An interesting question thereby arises: the more exports, the better? To answer this question, we develop a method to decompose firm-level pollution emissions, and empirically investigate the relationship between export intensity and environmental performance using Chinese firm-level data. Our results indicate that the answer to this question is “No”. First, OLS estimation shows that firms with higher export intensity have less pollution emissions, mainly because of smaller output scale and lower energy intensity (energy-to-labor ratio) rather than more advanced technologies. Second, we focus on PSM-DID estimation and find that only the increase in export intensity by a smaller extent is conducive to improving firms’ environmental performance. This effect is driven by decreasing energy intensity and thereby improving energy efficiency. This finding implies that firms should focus on both domestic and foreign markets, when they improve export participation. Third, those relationships are found to be heterogeneous across the firms in terms of different pollutants, ownership types, industrial sectors and provinces. In particular, mainly for private and foreign-funded firms, technology-intensive sectors and coastal provinces, increasing export intensity can improve environmental performance. Our study provides an in-depth empirical evidence on the relationship between export intensity and environmental performance in China, and provides a new insight and a better understanding for exports and environment from a micro perspective.