Are Exporters Mother Nature's Best Friends?

Abstract

This paper documents a relationship between international trade and environmental performance at the establishment level. Using a panel of establishment-level data over the years 1990-2006, I estimate the relationship between export orientation, import competition and plant level characteristics. I find a robust relationship between international trade and plant level pollution emissions. Exporters emit 5.3% less than non-exporters after controlling for output and their emissions are significantly less toxic relative to non-exporters. Import competition is associated with the exit of the smallest, most pollution intensive plants. There is no evidence that this result is caused by polluting firms relocating to country’s with low levels of environmental regulation and importing back into the U.S. This result provides an additional channel through which trade liberalization may impact pollution levels, which has implications for the previous trade-and-environment literature. Additionally, I explore the channels through which productivity, international trade and environmental performance may be related. I am able to rule out liability, but not establishment size and management quality. Even after controlling for these channels there remains an unexplained relationship between international trade and emissions. Finally, I develop a theoretical framework that is consistent with the empirical findings above. The empirical results are quite robust and suggest a strong relationship between international trade, environmental performance and plant-level productivity, but the direction of causality remains something of a mystery. JEL Classication: F1, Q5