Does Environmental Regulation Affect Firm Exports? Evidence from Wastewater Discharge Standard in China

37 Pages Posted: 8 Jul 2019

See all articles by Yan Zhang

Yan Zhang

Central University of Finance and Economics (CUFE)

Jingbo Cui

Wuhan University - School of Economics and Management

Chenghao Lu

Central University of Finance and Economics (CUFE)

Date Written: January 29, 2019

Abstract

This paper examines the effect of water pollution regulation on polluters’ exporting decisions and exporting structure. Using detailed firm-by-product level dataset, we employ a difference-in-differences model to identify the causal relationship between environmental regulation and firms’ exporting performance. We find that the stringent regulation decreases both export likelihood and export values. Moreover, we examine the channels that the environmental regulation could affect firms’ exporting performance through entry-exit of the export market, price transmission, adjustments of exporting destinations, and product switch. The tightening wastewater discharge standard appears to deter the new polluters rather than incumbents to enter the export market. Productive polluters could gain the relative larger export market by lowering down exporting prices and selling more products overseas. In response to this water pollution regulation, polluters would make substantial adjustments in their exporting destinations, exporting products, and exports value via different trade modes.

Keywords: Environmental Regulation, Water Pollution, Export, Pollution Haven Effect

JEL Classification: F18, Q53, Q56

Suggested Citation

Zhang, Yan and Cui, Jingbo and Lu, Chenghao, Does Environmental Regulation Affect Firm Exports? Evidence from Wastewater Discharge Standard in China (January 29, 2019). Available at SSRN: https://ssrn.com/abstract=3414927 or http://dx.doi.org/10.2139/ssrn.3414927

Yan Zhang

Central University of Finance and Economics (CUFE) ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China

Jingbo Cui (Contact Author)

Wuhan University - School of Economics and Management ( email )

School of Economics and Management
Wuhan, Hubei 430072
China

HOME PAGE: http://sites.google.com/site/jbcui2013

Chenghao Lu

Central University of Finance and Economics (CUFE) ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China

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