Cross-border environmental regulation and firm labor demand

Pavel Chakraborty, Anindya S. Chakrabarti and Chirantan Chatterjee

Journal of Environmental Economics and Management, 2023, vol. 117, issue C

Abstract: In 1994, due to environmental concerns, Germany banned a chemical called ‘Azo-dyes’, a primary input for the leather and textiles firms in India (a key exporter). Exploiting this as a quasi-natural experiment, we examine the effects of this cross-border regulatory change on labor compensation, particularly managerial, for both Indian upstream (dye-producing) and downstream (leather and textile) firms. We find that the regulation increased compensation of managers by 1.3%–18% in dye-producing firms compared to other chemical firms. This is due to the combination of changes such as investing in R&D, product churning, import of high-quality intermediates, due to the ban, which led to this change in within-firm labor composition. This increase in overall compensation is driven only by fixed component (wages), consistent with the effects of a long-run shock. We find no such effects for downstream firms. We believe, our study is one of the first to show that just like tariff, non-tariff barriers (NTBs) can also significantly affect within-firm labor composition.

Keywords: ‘Azo-dyes’; Non-tariff barriers; Cross-border environmental regulation; Managerial compensation; Dye-producing firms; Upstream and downstream sectors (search for similar items in EconPapers)
JEL-codes: F1 K32 L25 (search for similar items in EconPapers)
Date: 2023
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:eee:jeeman:v:117:y:2023:i:c:s0095069622001061

DOI: 10.1016/j.jeem.2022.102753

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