Trade and the Environment: The Role of Firm Heterogeneity
Year: 2013
Type: article
Abstract: 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.
DOI: 10.1111/roie.12092
Authors: Udo Kreickemeier, Philipp M. Richter
Language: English
Topic: Global trade and economics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2119411348