Working Paper No. 08-07

Are Exporters Mother Nature's Best Friends?

Scott Holladay

October 2008

ABSTRACT

This paper empirically analyzes the relationship between interna- tional trade and plant level pollution emissions for U.S. manufactur- ers. I develop a theoretical framework to study emissions in a het- erogenous rm international trade model. The results suggest that exporters should pollute less per unit of output than non-exporters in the same industry. Industries that face import competition should have fewer plants that generate high levels of emissions per unit of output. Their average emissions per output level should also be lower than other industries that are sheltered from international competi- tion. These implications are tested against a unique dataset built by combining plant level emissions data from the EPA and plant charac- teristic data from the National Establishment Time Series. The data set consists of 15,000 plants observed over 12 years and includes 8-digit SIC industry denitions. The empirical results conrm that exporters pollute around 8% less per unit of output than non-exporters. These results are consistent with a nearest-neighbor matching procedure used to address potential unobserved variable bias. I use this framework to examine the channels through which productivity impacts emissions. Industries that face import competition pollute 0.75% less than more sheltered industries. This dierence is due to the exit of small rms with high levels of emissions per output. I nd no evidence that this eect is related to polluting plants relocating in search of lower levels of environmental regulation.

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