Deterioration or improvement? Intermediate product import and enterprises' environmental performance

Abstract

As an important link in Global Value Chain, intermediate product import is a key method to connect domestic market and foreign market. It can improve country's competitiveness and reduce country's total emissions through import substitution effect. However, the essence of this process is just the transfer of pollution from one country to another. Does importing intermediate products really reduce country's emission intensity and improve its emission efficiency? The above question is significant in reality, but it is still pending at present. In view of this, our research constructs the micro trade model and uses data of Chinese enterprises to investigate causal impact of intermediate product import on emission intensity. We can learn that importing intermediates significantly reduces enterprises' emission intensity. Further analyses shows that rise in enterprises' abatement investment and increase in productivity after importing lead to reduction in emission intensity. This study examines the positive role of intermediate product import in improving emission efficiency from perspective of product trade, revealing importance of intermediate product import in country's economic development and pollution reduction.