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Trade Imbalance, Heterogeneous Firms and Pollution Emissions: Evidence from China’s Manufacturing Sector

Ling-Yun He and Xi Lin

Emerging Markets Finance and Trade, 2021, vol. 57, issue 4, 1008-1033

Abstract: China’s trade imbalance and environmental pollution have become a focus of world interest. As firms are those that are emitting pollutants, do trade imbalances affect firm-level pollution emissions? In this study, we use data on Chinese manufacturing firms to investigate the impacts of trade imbalances on firms’ pollution emissions. Our results indicate that trade imbalances (export-to-import ratio) are positively related to firms’ pollution emissions. Specifically, trade surpluses lead to an increase in pollution emissions, whereas trade deficits reduce emissions. These impacts are mainly due to change in the behavior of individual firms, including the scale, factor composition, and technical effects. Trade imbalances have heterogeneous impacts on firms with different types of ownership, in different sectors, and different provinces. Our study presents the first evidence on the impacts of trade imbalances on firm-level pollution emissions.

Date: 2021
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DOI: 10.1080/1540496X.2019.1612742

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