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Exporting and Pollution Abatement Expenditure: Evidence from Firm-Level Data

Soumendra N. Banerjee (), Jayjit Roy () and Mahmut Yasar

No 393, Globalization Institute Working Papers from Federal Reserve Bank of Dallas

Abstract: The relevance of analyzing whether exporting firms engage in greater pollution abatement cannot be overemphasized. For instance, the question relates to the possibility of export promotion policies being environmentally beneficial. In fact, the issue is especially relevant for developing countries typically characterized by ineffective environmental regulation. However, despite the significance of the topic, the extant literature examining the environmental consequences of firm-level trade is skewed toward developed countries. Moreover, the existing contributions rarely attend to concerns over non-random selection into exporting. Accordingly, we employ cross-sectional data across Indonesian firms as well as a number of novel identification strategies to assess the causal effect of exporting on abatement behavior. Two of the approaches are proposed by Millimet and Tchernis (2013), and entail either minimizing or correcting for endogeneity bias. The remaining methods, attributable to Lewbel (2012) and Klein and Vella (2009), rely on higher moments of the data to obtain exclusion restrictions. While we largely find exporting to encourage pollution abatement, the estimated impacts are more pronounced after accounting for selection into exporting.

Keywords: Treatment Effect; Pollution Abatement; Instrumental Variables; Environment; Exporting (search for similar items in EconPapers)
JEL-codes: C26 F18 F23 Q41 (search for similar items in EconPapers)
Pages: 31
Date: 2020-07-17
New Economics Papers: this item is included in nep-env, nep-int and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddgw:88637

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DOI: 10.24149/gwp393

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