Abstract | Trade and environment are important issues closely related to the development of national economy and the improvement of people's livelihood. The Report of the Nineteenth National Congress lists promoting trade as an important part of building a modern economic system and lists pollution prevention and control as one of the three key battles to win the victory of building a well-off society in an all-round way, which further highlights the importance of trade and environment.
At present, there are no literature to study the relationship between trade and environmental pollution of China using micro-data. Moreover, existing literature generally employ endogenous variables such as total volume of import and export or foreign direct investment to measure trade liberalization, which makes it relatively difficult to explain their results in a causal sense. In the light of this, this paper cleans China's industrial enterprise pollution database. After that, merge this very unique database with China's industrial enterprise database and industry level tariff rate data. Additionally, by virtue of the quasi-natural experiment of China's accession to WTO, a DID model is constructed to alleviate the endogeneity issue.
The results show: Trade barrier decrease (trade liberalization) has significantly reduced China's environmental pollution, and this conclusion is still valid after a series of robustness tests. In particular, SO2, a major pollutant emitted by enterprises, decreased by 2.3% for every unit decrease of trade barrier; Trade liberalization mainly affects enterprises’ pollution emissions through technique effects rather than scale effects; As far as the technique effects of trade liberalization on environmental pollution are concerned, biased technical change rather than neutral technical change dominates; For enterprises with higher export density and larger scale, the pollution reduction effect caused by trade liberalization is stronger.
The conclusions of this study imply that apart from regular channels have been identified by classical literature, trade can improve China's social welfare by improving its environmental conditions, which in turn provides useful policy enlightenment for promoting trade and winning the battle of pollution prevention and control in the new era.
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