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Why are firms that export cleaner? International trade, Abatement and Environmental Emissions

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  • Forslid, Rikard

    () (Stockholm University and CEPR)

  • Okubo, Toshihiro

    () (Keio university)

  • Ulltveit-Moe, Karen Helene

    () (University of Oslo and CEPR)

Abstract

This paper develops a theoretical model of trade and environmental emissions with heterogeneous firms, where firms make abatement investments and thereby affect their level of emissions. We show that investments in abatement are positively related to firm productivity and firm exports, while emission intensity is negatively related to firms' productivity and exports. The basic reason for these results is that a larger production scale supports more investments in abatement and, in turn, reduces emissions per output. We find that trade liberalization weeds out 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 the empirical implications of the model on emission intensity, abatement and exporting using firm-level data from Sweden. The empirical results support our model.

Suggested Citation

  • Forslid, Rikard & Okubo, Toshihiro & Ulltveit-Moe, Karen Helene, 2015. "Why are firms that export cleaner? International trade, Abatement and Environmental Emissions," Research Papers in Economics 2015:2, Stockholm University, Department of Economics.
  • Handle: RePEc:hhs:sunrpe:2015_0002
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    References listed on IDEAS

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    Cited by:

    1. Soumendra N. Banerjee & Jayjit Roy & Mahmut Yasar, 2019. "Exporting and Pollution Abatement Expenditure: Evidence from Firm-Level Data," Working Papers 19-10, Department of Economics, Appalachian State University.
    2. repec:eee:jeeman:v:94:y:2019:i:c:p:118-139 is not listed on IDEAS
    3. Geoffrey Barrows & Hélène Ollivier, 2018. "Foreign Demand and Greenhouse Gas Emissions: Empirical Evidence with Implications for Leakage," PSE Working Papers halshs-01945848, HAL.
    4. Geoffrey Barrows & Helene Ollivier, 2018. "Foreign Demand and Greenhouse Gas Emissions: Empirical Evidence with Implications for Leakage," Working Papers 2018.16, FAERE - French Association of Environmental and Resource Economists.
    5. repec:anr:reveco:v:9:y:2017:p:59-85 is not listed on IDEAS
    6. Kreickemeier, Udo & Richter, Philipp M., 2019. "Environmental policy and firm selection in the open economy," KCG Working Papers 15, Kiel Centre for Globalization (KCG).
    7. M. Scott Taylor, "undated". "Trade and the Environment: New Methods, Measurements, and Results NBER Working Paper No. 22636," Working Papers 2016-46, Department of Economics, University of Calgary, revised 01 Dec 2016.
    8. Deng, Yuping & Wu, Yanrui & Xu, Helian, 2019. "Political connections and firm pollution behaviour : An empirical study," BOFIT Discussion Papers 4/2019, Bank of Finland, Institute for Economies in Transition.
    9. Qirjo, Dhimitri & Pascalau, Razvan & Krichevskiy, Dmitriy, 2019. "CETA and Air Pollution," MPRA Paper 95608, University Library of Munich, Germany.
    10. Vera Danilina, 2017. "Trade Integration and the Polarisation of Eco-Labelling Strategies," AMSE Working Papers 1725, Aix-Marseille School of Economics, France.
    11. Roy, Jayjit & Yasar, Mahmut, 2015. "Energy efficiency and exporting: Evidence from firm-level data," Energy Economics, Elsevier, vol. 52(PA), pages 127-135.
    12. Jevan Cherniwchan & Brian R. Copeland & M. Scott Taylor, 2016. "Trade and the Environment: New Methods, Measurements, and Results," CESifo Working Paper Series 6109, CESifo Group Munich.
    13. Matilde Bombardini & Bingjing Li, 2016. "Trade, Pollution and Mortality in China," NBER Working Papers 22804, National Bureau of Economic Research, Inc.
    14. repec:eee:ecolet:v:175:y:2019:i:c:p:80-83 is not listed on IDEAS
    15. Brucal, Arlan & Javorcik, Beata & Love, Inessa, 2019. "Good for the environment, good for business: foreign acquisitions and energy intensity," LSE Research Online Documents on Economics 101090, London School of Economics and Political Science, LSE Library.
    16. 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.
    17. repec:eee:deveco:v:133:y:2018:i:c:p:264-274 is not listed on IDEAS
    18. Vera Danilina, 2017. "Polarisation of Eco-Labelling Strategies," Working Papers 2017.26, FAERE - French Association of Environmental and Resource Economists.
    19. Matthew A. COLE & Robert R.J. ELLIOTT & OKUBO Toshihiro & Liyun ZHANG, 2017. "The Pollution Outsourcing Hypothesis: An empirical test for Japan," Discussion papers 17096, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    Keywords

    Heterogeneous firms; environmental emissions; abatement; international trade;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • 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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