IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/13860.html
   My bibliography  Save this paper

Trade Growth, Production Fragmentation, and China's Environment

Author

Listed:
  • Judith M. Dean
  • Mary E. Lovely

Abstract

Trade growth for a relatively poor country is thought to shift the composition of industrial output towards dirtier products, aggravating environmental damage. China's rapidly growing trade and serious environmental degradation appear to be no exception. However, much of China's trade growth is attributable to the international fragmentation of production. This kind of trade could be cleaner, if fragmented production occurs in cleaner goods, or if China specializes in cleaner stages of production within these goods. Using Chinese official environmental data on air and water pollution, and official trade data, we present evidence that (1) China's industrial output has become cleaner over time, (2) China's exports have shifted toward relatively cleaner, highly fragmented sectors, and (3) the pollution intensity of Chinese exports has fallen dramatically between 1995 and 2004. We then explore the role of fragmentation and FDI in this trend toward cleaner trade. Beginning with a standard model of the pollution intensity of trade, we develop a model that explicitly introduces production fragmentation into the export sector. We then estimate this model using pooled data on four pollutants over ten years. Econometric results support the view that increased FDI and production fragmentation have contributed positively to the decline in the pollution intensity of China's trade, as has accession to the WTO and lower tariff rates.

Suggested Citation

  • Judith M. Dean & Mary E. Lovely, 2008. "Trade Growth, Production Fragmentation, and China's Environment," NBER Working Papers 13860, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:13860
    Note: ITI
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w13860.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. repec:zbw:bofitp:2008_031 is not listed on IDEAS
    2. Chow, Gregory C., 2006. "New capital estimates for China: Comments," China Economic Review, Elsevier, vol. 17(2), pages 186-192.
    3. H. David Robison, 1988. "Industrial Pollution Abatement: The Impact on Balance of Trade," Canadian Journal of Economics, Canadian Economics Association, vol. 21(1), pages 187-199, February.
    4. Holz, Carsten A., 2006. "New capital estimates for China," China Economic Review, Elsevier, vol. 17(2), pages 142-185.
    5. Judith M. Dean & Mary E. Lovely & Hua Wang, 2017. "Are foreign investors attracted to weak environmental regulations? Evaluating the evidence from China," World Scientific Book Chapters, in: Mary E Lovely (ed.), International Economic Integration and Domestic Performance, chapter 9, pages 155-167, World Scientific Publishing Co. Pte. Ltd..
    6. Brian R. Copeland & M. Scott Taylor, 2004. "Trade, Growth, and the Environment," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 7-71, March.
    7. Robert Koopman & Zhi Wang & Shang-Jin Wei, 2008. "How Much of Chinese Exports is Really Made In China? Assessing Domestic Value-Added When Processing Trade is Pervasive," NBER Working Papers 14109, National Bureau of Economic Research, Inc.
    8. Judith M. Dean, 2002. "Does trade liberalization harm the environment? A new test," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 35(4), pages 819-842, November.
    9. Brian R. Copeland & M. Scott Taylor, 1994. "North-South Trade and the Environment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(3), pages 755-787.
    10. Arik Levinson, 2009. "Technology, International Trade, and Pollution from US Manufacturing," American Economic Review, American Economic Association, vol. 99(5), pages 2177-2192, December.
    11. Barry Naughton, 2007. "The Chinese Economy: Transitions and Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262640643, December.
    12. John Henley & Colin Kirkpatrick & Georgina Wilde, 1999. "Foreign Direct Investment in China: Recent Trends and Current Policy Issues," The World Economy, Wiley Blackwell, vol. 22(2), pages 223-243, March.
    13. Ederington Josh & Levinson Arik & Minier Jenny, 2004. "Trade Liberalization and Pollution Havens," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(2), pages 1-24, November.
    14. Nicholas R. Lardy, 1994. "China in the World Economy," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 24.
    15. Werner Antweiler & Brian R. Copeland & M. Scott Taylor, 2001. "Is Free Trade Good for the Environment?," American Economic Review, American Economic Association, vol. 91(4), pages 877-908, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Judith M. Dean & Mary E. Lovely & Hua Wang, 2017. "Are foreign investors attracted to weak environmental regulations? Evaluating the evidence from China," World Scientific Book Chapters, in: Mary E Lovely (ed.), International Economic Integration and Domestic Performance, chapter 9, pages 155-167, World Scientific Publishing Co. Pte. Ltd..
    2. Natalia Zugravu-Soilita, 2019. "Trade in Environmental Goods and Air Pollution: A Mediation Analysis to Estimate Total, Direct and Indirect Effects," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(3), pages 1125-1162, November.
    3. Ulltveit-Moe, Karen Helene & Forslid, Rikard & Okubo, Toshihiro, 2011. "Why are firms that export cleaner? International trade and CO2 emissions," CEPR Discussion Papers 8583, C.E.P.R. Discussion Papers.
    4. Dhimitri Qirjo & Razvan Pascalau, 2019. "The Role of TTIP on the Environment," Southern Economic Journal, John Wiley & Sons, vol. 85(4), pages 1262-1285, April.
    5. Michael Schymura & Andreas Löschel, 2012. "Trade and the Environment: An Application of the WIOD Database," EcoMod2012 3948, EcoMod.
    6. Natalia Zugravu-Soilita, 2017. "Trade in Environmental Goods: Empirical Exploration of Direct and Indirect Effects on Pollution by Country’s Trade Status," Working Papers 2017.56, Fondazione Eni Enrico Mattei.
    7. Liu, Mengdi & Zhang, Bing & Liao, Xianchun, 2022. "Can trade liberalization promote green production? Evidence from China's manufacturing enterprises," Journal of Asian Economics, Elsevier, vol. 79(C).
    8. Natalia Zugravu-Soilita, 2018. "The impact of trade in environmental goods on pollution: what are we learning from the transition economies’ experience?," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 20(4), pages 785-827, October.
    9. He, Ling-Yun & Huang, Geng, 2021. "How can export improve firms’ energy efficiency? The role of innovation investment," Structural Change and Economic Dynamics, Elsevier, vol. 59(C), pages 90-97.
    10. Nicolas Peridy, 2006. "Pollution effects of free trade areas: Simulations from a general equilibrium model," International Economic Journal, Taylor & Francis Journals, vol. 20(1), pages 37-62.
    11. Bombardini, Matilde & Li, Bingjing, 2020. "Trade, pollution and mortality in China," Journal of International Economics, Elsevier, vol. 125(C).
    12. Ling-Yun He & Liang Wang, 2019. "Import Liberalization of Intermediates and Environment: Empirical Evidence from Chinese Manufacturing," Sustainability, MDPI, vol. 11(9), pages 1-15, May.
    13. Sunghoon Chung, 2012. "Environmental Regulation and the Pattern of Outward FDI: An Empirical Assessment of the Pollution Haven Hypothesis," Departmental Working Papers 1203, Southern Methodist University, Department of Economics.
    14. 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.
    15. Svetlana Batrakova & Ronald Davies, 2012. "Is there an environmental benefit to being an exporter? Evidence from firm-level data," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(3), pages 449-474, September.
    16. Forslid, Rikard & Okubo, Toshihiro & Ulltveit-Moe, Karen Helene, 2018. "Why are firms that export cleaner? International trade, abatement and environmental emissions," Journal of Environmental Economics and Management, Elsevier, vol. 91(C), pages 166-183.
    17. Maximilian Auffhammer & Weizeng Sun & Jianfeng Wu & Siqi Zheng, 2016. "The Decomposition And Dynamics Of Industrial Carbon Dioxide Emissions For 287 Chinese Cities In 1998–2009," Journal of Economic Surveys, Wiley Blackwell, vol. 30(3), pages 460-481, July.
    18. Jeffrey A. Frankel & Andrew K. Rose, 2005. "Is Trade Good or Bad for the Environment? Sorting Out the Causality," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 85-91, February.
    19. Hering, Laura & Poncet, Sandra, 2014. "Environmental policy and exports: Evidence from Chinese cities," Journal of Environmental Economics and Management, Elsevier, vol. 68(2), pages 296-318.
    20. Gori, Giuseppe Francesco & Lambertini, Luca, 2013. "Trade liberalisation between asymmetric countries with environmentally concerned consumers," Regional Science and Urban Economics, Elsevier, vol. 43(4), pages 549-560.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F2 - International Economics - - International Factor Movements and International Business

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:13860. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.