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Why are firms that export cleaner? International trade and CO2 emissions

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  • Forslid, Rikard
  • Okubo, Toshihiro
  • Ulltveit-Moe, Karen-Helene

Abstract

This paper develops a model of trade and CO2 emissions with heterogenous firms, where firms make abatement investments and thereby have an impact on their level of emissions. The model shows that investments in abatements are positively related to firm productivity and firm exports. Emission intensity is, however, negatively related to .rms. productivity and exports. The basic reason for these results is that a larger production scale supports more investments in abatement and, in turn, lower emissions per output. We show that the overall effect of trade is to reduce emissions. Trade weeds out some of the least productive and dirtiest firms thereby shifting production away from relatively dirty low productive local firms to more productive and cleaner exporters. The overall effect of trade is therefore to reduce emissions. We test empirical implications of the model using unique Swedish firm-level data. The empirical results support our model.

Suggested Citation

  • Forslid, Rikard & Okubo, Toshihiro & Ulltveit-Moe, Karen-Helene, 2011. "Why are firms that export cleaner? International trade and CO2 emissions," CEPR Discussion Papers 8583, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8583
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Peter Neary & Monika Mrazova, 2011. "Selection Effects with Heterogeneous Firms," Economics Series Working Papers 588, University of Oxford, Department of Economics.
    2. Cui, Jingbo & Lapan, Harvey & Moschini, GianCarlo, 2012. "Are Exporters More Environmentally Friendly than Non-Exporters? Theory and Evidence," Staff General Research Papers Archive 35549, Iowa State University, Department of Economics.
    3. Cui, Jingbo & Qian, Hang, 2013. "The Effects of Exports on Facility Environmental Performance: Evidence from a Matching Approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149550, Agricultural and Applied Economics Association.
    4. Geoffrey Barrows & Helene Ollivier, 2016. "Emission intensity and firm dynamics: reallocation, product mix, and technology in India," GRI Working Papers 245, Grantham Research Institute on Climate Change and the Environment.
    5. Ahmed, Khalid & Rehman, Mujeeb Ur & Ozturk, Ilhan, 2017. "What drives carbon dioxide emissions in the long-run? Evidence from selected South Asian Countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 70(C), pages 1142-1153.
    6. Cherniwchan, Jevan, 2017. "Trade liberalization and the environment: Evidence from NAFTA and U.S. manufacturing," Journal of International Economics, Elsevier, vol. 105(C), pages 130-149.
    7. Anouliès, Lisa, 2017. "Heterogeneous firms and the environment: a cap-and-trade program," Journal of Environmental Economics and Management, Elsevier, vol. 84(C), pages 84-101.

    More about this item

    Keywords

    CO2-emissions; heterogeneous firms; international trade;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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