Good for business, not so much for the environment?

Michele Delera, Nanditha Mathew and Tania Treibich
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Nanditha Mathew: Maastricht Graduate School of Governance, RS: GSBE MORSE, RS: GSBE MGSoG
Tania Treibich: RS: GSBE MORSE, Macro, International & Labour Economics

No 2025-009, MERIT Working Papers from United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT)

Abstract: The global fragmentation of production has important implications for the environment. As emerging economies increase their participation in trade, scale effects increase environmental impacts worldwide. Yet at the same time, access to international markets might help offset these impacts by increasing the efficiency of production. Existing literature suggests that trading firms tend to be more energy efficient than non-traders. However, this literature does not take into account the effect of firms’ product baskets. In this paper, we leverage a rich plantand product-level database from India to investigate the effects of importing on plant-level environmental outcomes. We first construct a measure of energy efficiency that is net of effects arising from plants’ product baskets. We then use an event study set up to compare outcomes between importers and future importers at the time of their entry into import markets. Our design takes advantage of plants’ staggered entry into importing to address issues of selection. Our findings suggest that after they start importing, plants experience increases in their energy intensity. Plants which start importing also grow larger and more productive, and diversify their product baskets. Our results suggest that access to international markets leads to gains in scale and productivity, but not in environmental performance. This finding suggests that there is an environmental cost to learning and product diversification.

JEL-codes: D22 F10 F14 F18 O11 O33 (search for similar items in EconPapers)
Date: 2025-03-31
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Persistent link: https://EconPapers.repec.org/RePEc:unm:unumer:2025009

DOI: 10.53330/WCOG1682

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