Pollution Abatement and Production Outsourcing in India

Saibal Kar () and Sarmistha Banerjee
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Sarmistha Banerjee: Jadavpur University

Journal of Industry, Competition and Trade, 2022, vol. 22, issue 1, No 5, 83-97

Abstract: Abstract Production reorganization at the firm level as an outcome of environmental mandates is rarely studied in the literature. This paper shows that when exposed to abatement policy to address environmental pollution, a large number of firms from pollution-intensive industries in India outsource production as abatement cost rises. Static and dynamic panel data estimates for firms normalized for size heterogeneity from 7 major industries in India between 2008 and 2020 show robust patterns controlled for a set of covariates. Application of difference GMM estimates avows that pollution abatement cost has a significant positive impact on outsourcing, while improvement in productivity lowers the overall rate. Moreover, when energy prices are high but post-tax profit is positive, the firms outsource less even if the abatement cost rises.

Keywords: Production outsourcing; Abatement cost; Firms; Panel data; India (search for similar items in EconPapers)
JEL-codes: C33 D22 Q52 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10842-021-00371-7

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