Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/272546 
Year of Publication: 
2023
Series/Report no.: 
IZA Discussion Papers No. 15919
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We study long-run environmental impacts of trade liberalization on US manufacturing by exploiting a plausibly exogenous reduction in US trade policy uncertainty: the conferral of Permanent Normal Trade Relations (PNTR) to China. Using detailed data on establishment-level pollution emissions and business characteristics - including trade activities and global subsidiary information - from 1997 to 2017, we show that establishments reduce toxic emissions in response to a reduction in trade policy uncertainty. Emission abatement is mainly driven by a decline in pollution emission intensity, and not by establishment exits or a reduction in production scale. Emission reduction is more pronounced for (i) establishments with foreign sourcing networks and (ii) those under more stringent environmental regulations. We provide further evidence that supports the pollution haven hypothesis whereby offshoring is central to the mechanism - US manufacturers begin to source from abroad and establish more subsidiaries in China after PNTR, especially those that emit pollutants heavily.
Subjects: 
pollution haven hypothesis
toxics release inventory
pollution emissions
trade and environment
trade policy uncertainty
offshoring
particulate matter
PNTR
JEL: 
Q53
Q56
F14
F18
F23
Document Type: 
Working Paper

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