Hostname: page-component-586b7cd67f-tf8b9 Total loading time: 0 Render date: 2024-11-25T10:15:51.687Z Has data issue: false hasContentIssue false
  • English
  • Français

Environmental standards, trade and innovation: evidence from a natural experiment

Published online by Cambridge University Press:  19 April 2017

Pavel Chakraborty
Pavel Chakraborty*
Affiliation:
Centre for Trade and Development, School of International Studies, Jawaharlal Nehru University, New Delhi – 110067, India. Tel: +91 9821778098. E-mail: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Exploiting a natural experiment involving the imposition of a technical regulation by Germany on Indian leather and textile industries in 1994, a firm-level data set is used to study the trade, adaptation and discontinuity effects and how they vary by firm size. It is found that: (a) regulation significantly increases the export revenues of a firm through use of new technology and high-quality imported raw materials – indicating a possible signalling effect; (b) this gain is concentrated only on the upper half of the firm size distribution, i.e., in the 3rd and 4th quartiles; (c) use of imported raw materials significantly explains low exit probabilities of a firm; and (d) there is evidence of a sorting effect – regulation significantly affecting the operation of small firms.

Type
Research Article
Information
Environment and Development Economics , Volume 22 , Issue 4 , August 2017 , pp. 414 - 446
Copyright
Copyright © Cambridge University Press 2017 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Andre, J., Gonzalez, P., and Porteiro, N. (2009), ‘Strategic quality competition and the Porter hypothesis’, Journal of Environmental Economics and Management 57(2): 182–194.CrossRefGoogle Scholar
Baldwin, R. (2000), ‘Regulatory protectionism, developing nations and a two-tier world trading system’, in Collins, S. and Rodrik, D. (eds), Brookings Trade Forum, Washington, DC: Brookings Institution, pp. 237–293.Google Scholar
Berman, E. and Bui, L. (2001), ‘Environmental regulation and productivity’, Review of Economics and Statistics 83(3): 498–510.Google Scholar
Biorn, E., Golombek, R., and Rakneurd, A. (1998), ‘Environmental regulations and plant exit’, Environmental and Resource Economics 11(1): 35–59.Google Scholar
Bustos, P. (2011), ‘Trade liberalization, exports and technology upgrading: evidence on the impact of MERCOSUR on Argentinian firms’, American Economic Review 101(1): 304–340.Google Scholar
Chakraborty, P. (2009), ‘Standards or hazards: environmental compliance and market access concerns for India's marine and agriculture products’, Asia Pacific Journal of Environmental Law 12(1): 85–116.Google Scholar
Chaturvedi, S. and Nagpal, G. (2002), ‘WTO and product-related environmental standards: emerging issues and policy options before India’, RIS Working Paper No. 36, Research and Information System for Developing Countries (RIS), New Delhi.Google Scholar
Chen, X., Otsuki, T., and Wilson, J. (2008), ‘Standards and export decisions: firm-level evidence from developing countries’, Journal of International Trade and Economic Development 17(4): 501–523.Google Scholar
Conrad, K. and Wang, J. (1993), ‘The effect of emission taxes and abatement subsidies on market structure’, International Journal of Industrial Organization 11(4): 499–518.Google Scholar
Council of Leather Exports (2008), Annual Reports, Chennai: Council of Leather Exports.Google Scholar
Dasgupta, N. (2000), ‘Environmental enforcement and small industries in India: reworking the problem in the poverty context’, World Development 28(5): 945–967.Google Scholar
Dean, J., Brown, R., and Stango, V. (2000), ‘Environmental regulation as a barrier to the formation of small manufacturing establishments: a longitudinal examination’, Journal of Environmental Economics and Management 40(1): 56–75.Google Scholar
Debroy, B. and Santhanam, A. (1993), ‘Matching trade codes with industrial codes’, Foreign Trade Bulletin XXIV(1): 5–27.Google Scholar
Greaker, M. (2006), ‘Spillovers in the development of new, pollution abatement technology: a new look at the Porter hypothesis’, Journal of Environmental Economics and Management 52(1): 411–420.Google Scholar
IKB Deutsche Industriebank (1994), Zukunftsmarkt Indien, Dusseldorf: IKB.Google Scholar
Jaffe, A. and Palmer, K. (1997), ‘Environmental regulation and innovation: a panel data study’, Review of Economics and Statistics 79(4): 610–619.Google Scholar
Jones, P. and Hudson, J. (1996), ‘Standardization and the costs of assessing quality’, European Journal of Political Economy 12(2): 355–361.Google Scholar
Khandelwal, A. and Topalova, P. (2011), ‘Trade liberalization and firm productivity: the case of India’, Review of Economics and Statistics 93(3): 995–1009.Google Scholar
Levinshon, J. and Petrin, A. (2003), ‘Estimating production functions using inputs to control for unobservables’, Review of Economic Studies 70(2): 317–342.Google Scholar
Li, M. (2012), ‘Using the propensity score method to estimate causal effects: a review and practical guide’, Organizational Research Methods 16(2): 188–226.Google Scholar
Lipscomb, M. (2008), ‘The effect of environmental enforcement on product choice and competition: theory and evidence from India’, Mimeograph, Department of Economics, University of Notre Dame, IN.Google Scholar
Melitz, M. (2003), ‘The impact of trade on intra-industry reallocations and aggregate industry productivity’, Econometrica 71(6): 1695–1725.Google Scholar
Ministry of Textiles (2008), Annual Report, New Delhi: Government of India.Google Scholar
OECD (2006a), Limits on Aromatic Amines in Textiles Coloured with Azo Dyes, Paris: Organisation for Economic Co-Operation and Development.Google Scholar
OECD (2006b), Limits on Chemical Residues in Leather Goods, Paris: Organisation for Economic Co-Operation and Development.Google Scholar
Pavcnik, N. (2002), ‘Trade liberalization, exit, and productivity improvements: evidence from Chilean plants’, Review of Economic Studies 69(1): 245–76.CrossRefGoogle Scholar
Porter, M. and Van der Linde, C. (1995), ‘Towards a new conception of the environment–competitiveness relationship’, Journal of Economic Perspectives 4(4): 97–118.Google Scholar
Santos Silva, J.M.C. and Silvana, T. (2006), ‘The log of gravity’, Review of Economics and Statistics 88(4): 641–658.Google Scholar
Sengupta, A. (2010), ‘Environmental regulation and industry dynamics’, B.E. Journal of Economic Analysis & Policy 10(1): 1–27.Google Scholar
Swann, P., Temple, P., and Shurmer, M. (1996), ‘Standards and trade performance: the UK experience’, Economic Journal 106(438): 1297–1313.Google Scholar
TERI (The Energy and Resources Institute) (2005), Trade Liberalization – Impacts and Opportunities for the Indian Leather and Textile Small and Medium-Scale Enterprises, Project submitted to the Ministry of Commerce, Government of India and British High Commission, India.Google Scholar
Tewari, M. (2001), ‘Trade liberalization and the restructuring of Tamil Nadu's leather sector: coping with liberalization's new environmental challenges and lessons from prior episodes of adjustment’, Unpublished paper prepared for the Center for International Development, Harvard University and the Government of Tamil Nadu, India.Google Scholar
Tewari, M. and Pillai, P. (2005), ‘Global standards and the dynamics of environmental compliance in India's leather industry’, Oxford Development Studies 33(2): 245–267.Google Scholar
UNCTAD (2005), UNCTAD Trade and Development Report, Geneva: UNCTAD.Google Scholar
Supplementary material: PDF

Chakraborty supplementary material

Online Appendix

Download Chakraborty supplementary material(PDF)
PDF 536.8 KB