Environmental regulation, corporate strategy and trade costs: a regression discontinuity in time design

Han Zou ()
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Han Zou: Central South University

Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, 2024, vol. 26, issue 5, No 48, 12163-12191

Abstract: Abstract Under local protectionism, environmental regulation may harm market integration and create expensive domestic trade cost. After matching data of trade flows from Chinese Customs to A-listed enterprise, the Head–Ries trade cost index is used to measure domestic and international trade costs during 2003–2013. Then, the environmental information disclosure (EID) released in 2008 is introduced as a policy cutoff, and this article adopts the regression discontinuity in time model to explore its effects on trade costs. After a set of robustness tests, the results show that EID leads to significant discontinuities in trade costs, suggesting a 0.077 increase in domestic trade cost but a 0.222 decrease in international trade cost. Domestic market segmentation goes against internal circulation of commodities, and regulated enterprises alternatively enter international markets to seek scale economies. The further mechanism test applies the two-stage least squares model to investigate corporate strategy, and it proves that EID generates an overall decline in corporate productivity. After the exit of low-productivity enterprises, the market structure becomes more concentrated and remaining enterprises gain export competitiveness. However, corporate productivity fails to significantly reduce international trade cost, while the export scale of leading enterprises in high-concentrated market has an absolute advantage. Graphical abstract

Keywords: Environmental information disclosure; Trade costs; Regression discontinuity in time; Corporate productivity; Market structure (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10668-023-03742-8

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