Are exporters cleaner? Another look at the trade-environment nexus

We study how inference about the relationship between firms' export status and their emissions intensity depends on the means for measuring output. Firms' use of intermediate inputs (outsourcing), whose production entails emissions that typically are not attributed to the firm, underlies this. If export status is positively related to outsourcing, then the choice of output measure plays a key role in the inference and interpretation of the empirical export-environmental performance relationship. Using total sales, instead of value added, as an output proxy mechanically makes the exporters look cleaner. An analysis of microdata from Chile shows evidence consistent with our thesis. Using a simple firm-level emissions decomposition, we show formally why the distinction between sales and value added is important.