Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/222770
Authors: 
Sharma, Shruti
Year of Publication: 
2019
Series/Report no.: 
ADBI Working Paper Series No. 1003
Abstract: 
This paper analyzes the impact of tariff liberalization and foreign direct investment on pollution from a plant-level perspective. It considers how globalization impacts plant-level investment in pollution abatement expenditure. Popular hypotheses on trade and pollution cite the pollution haven effect - that trade leads to a worsening of environmental conditions in developing countries. By analyzing the differential impact of input and output tariff liberalization, however, this paper finds that input tariff liberalization actually induces plants to invest more in pollution abatement equipment. Further, it finds that an increase in competition through output tariff liberalization does not in fact lead to a decline in spending on pollution control equipment in order to cut costs, as some theories might suggest. Further, it also finds a positive impact of increased inflows of foreign direct investment on spending in pollution control equipment, arguably through access to cleaner foreign technology. These effects are mainly driven by states that are newly emerging as the main attractions for foreign direct investment.
Subjects: 
pollution control capital
input tariffs
foreign direct investment
plant heterogeneity
India
JEL: 
Q52
F61
F64
F18
Creative Commons License: 
https://creativecommons.org/licenses/by-nc-nd/3.0/igo/
Document Type: 
Working Paper

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