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Title:Trade and the environment: The role of firm heterogeneity PDF Logo
Authors:Kreickemeier, Udo
Richter, Philipp M.
Issue Date:2012
Series/Report no.:CESifo Working Paper: Trade Policy 3846
Abstract:This paper derives a new effect of trade liberalisation on the quality of the environment. We show that in the presence of heterogeneous firms the aggregate volume of emissions is influenced not only by the long-established scale effect, but also by a reallocation effect resulting from an increase in the relative size of more productive firms. We show how the relative importance of these effects, and hence the overall effect of trade liberalisation on the environment, is affected by the emission-intensity at the firm level: Aggregate emissions decrease when trade is liberalised if and only if firm-specific emission intensity decreases strongly with increasing firm productivity.
Subjects:trade and environment
monopolistic competition
heterogeneous firms
environmental effects
JEL:F12
F18
Q56
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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