New Trade Models, Same Old Emissions?

Robin Sogalla, Joschka Wanner and Yuta Watabe

No 11596, CESifo Working Paper Series from CESifo

Abstract: This paper investigates the role of firm heterogeneity in environmentally extended new trade models, contrasting Eaton-Kortum and Melitz models to Armington and Krugman models. We show that when emissions per sales are constant across firms -- a standard assumption in the literature -- all four models predict identical emission responses. However, when emissions per quantity are constant across firms, this equivalence breaks. We propose a generalized framework that nests both assumptions. Calibrating the model with multiple industries and estimating the key elasticity between emission intensity and productivity using German firm-level data, we find that firm heterogeneity considerably raises emissions from trade liberalization.

Keywords: international trade; carbon emissions; firm heterogeneity; quantitative modeling (search for similar items in EconPapers)
JEL-codes: F11 F12 F18 Q56 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-ene, nep-env and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11596

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