Export cost of air pollution: A regression discontinuity design

Abstract

This study examines the impact of air pollution on exports in China using a regression discontinuity design based on the Qinling Mountains-Huai River line. The findings show that air pollution harms firm exports, with a more pronounced impact on non-state-owned enterprises, heavily polluting industries, and densely populated regions. Specifically, a 1 % increase in air pollution correlates with an average reduction of 0.661 % in exports. These inhibitory effects are mainly caused by decreasing productivity, reducing markup rates, damaging regional quality reputations, causing labour resource misallocation and strengthening environmental regulations. Although air pollution spillovers from neighbouring cities may temporarily boost local firm exports and total production, they do not fully mitigate the overall negative impact of air pollution.