Trade Liberalization and SO2 Emissions: Firm-Level Evidence from China’s WTO Entry

51 Pages Posted: 21 Jul 2020

See all articles by Andreas Löschel

Andreas Löschel

University of Muenster - Chair of Microeconomics, esp. Energy and Resource Economics

Jiansuo Pei

Renmin University of China

Bodo Sturm

ZEW – Leibniz Centre for European Economic Research

Anqi Yu

University of International Business and Economics (UIBE)

LEI LI

Nankai University

Date Written: 2020

Abstract

Is trade liberalization contributing to cleaner production amongst manufacturing firms? Theoretical predictions and empirical evidences are mixed. This study utilizes China’s dual trade regime and China’s WTO entry in 2001 to construct a unique micro dataset on manufacturing firms for China for the period 2000-2007, and performs a difference-in-difference estimation strategy to directly examine this issue. Specifically, normal exporters that saw tariff changes during the same period form the treatment group; while processing exporters that enjoy tariff-exemptions both pre- and post-WTO entry serve as the control group. Results show that China’s WTO entry contributed to a lower SO2 emission intensity for normal exporting firms. We further examine the mechanism and show that the productivity channel accounted for the observed pattern. Specifically, more efficient normal exporters saw greater decline of SO2 emission intensity than average normal exporters. This study contributes to a better understanding of the impact of trade on the environment, especially in developing countries. It also complements the literature in terms of providing China’s micro evidence on the impact of trade liberalization on firm’s environmental performance.

Keywords: WTO; trade liberalization; dual trade regime; SO2 emission intensity; China

JEL Classification: F18; Q53; Q56

Suggested Citation

Löschel, Andreas and Pei, Jiansuo and Sturm, Bodo and Yu, Anqi and LI, LEI, Trade Liberalization and SO2 Emissions: Firm-Level Evidence from China’s WTO Entry (2020). ZEW - Centre for European Economic Research Discussion Paper No. 20-031, Available at SSRN: https://ssrn.com/abstract=3644175 or http://dx.doi.org/10.2139/ssrn.3644175

Andreas Löschel (Contact Author)

University of Muenster - Chair of Microeconomics, esp. Energy and Resource Economics ( email )

Universitätsstr. 14-16
48143 Munster
Germany

HOME PAGE: http://www.wiwi.uni-muenster.de/eroe

Jiansuo Pei

Renmin University of China ( email )

59, Zhonguancun Street
Haidian District
Beijing, Beijing 100872
China
+861062699033 (Phone)

Bodo Sturm

ZEW – Leibniz Centre for European Economic Research

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Anqi Yu

University of International Business and Economics (UIBE) ( email )

10, Huixin Dongjie
Changyang District
Beijing, Beijing 100029
China

LEI LI

Nankai University ( email )

94 Weijin Road
Tianjin, 300071
China

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