Import liberalization and pollution reduction: Firm-level evidence from Chinese manufacturing

Abstract

Opening not only promotes domestic economic growth but also has an impact on the environment. This paper analyzes the impact of import liberalization on firms’ pollution emissions and its mechanism. We first analyze the impact and mechanism of import liberalization on firm pollution emissions through a theoretical model, then use the data of Chinese industrial firms for empirical analysis. Empirical analysis results show that cheaper imported inputs can significantly reduce firms’ emission of sulfur dioxide and chemical oxygen demand, whereas lower output tariffs have no significant impact. Lower input tariffs can reduce pollution intensity via productivity and clean technology effect. The pollution reduction effect of cheaper input is more obvious for general trade firms and foreign-funded firms. This paper provides a useful reference for how to promote the domestic environment under the context of global value chains and multiple trade risks.