Trade and the Environment: The Role of Firm Heterogeneity
In this paper, we derive a new effect of trade liberalization on the quality of the environment. We show that in the presence of heterogeneous firms, the aggregate volume of emissions is influenced by a reallocation effect resulting from an increase in the relative size of more productive firms. The relative importance of this reallocation effect and the scale effect well-known from the literature is affected by the emission intensity at the firm level. Domestic emissions decrease as a result of a unilateral tariff reduction if and only if firm-specific emission intensity decreases strongly with increasing firm productivity. As a result of the induced change in foreign emissions, domestic pollution can increase even if domestic emissions decrease.
Year of publication: |
2014
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Authors: | Kreickemeier, Udo ; Richter, Philipp M. |
Published in: |
Review of International Economics. - Wiley Blackwell, ISSN 0965-7576. - Vol. 22.2014, 2, p. 209-225
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Publisher: |
Wiley Blackwell |
Saved in:
Online Resource
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