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Trade Policy Uncertainty, Offshoring, and the Environment: Evidence from US Manufacturing Establishments

Author

Listed:
  • Choi, Jaerim

    (University of Hawaii at Manoa)

  • Hyun, Jay

    (HEC Montreal)

  • Kim, Gueyon

    (University of California, Santa Cruz)

  • Park, Ziho

    (National Taiwan University)

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.

Suggested Citation

  • Choi, Jaerim & Hyun, Jay & Kim, Gueyon & Park, Ziho, 2023. "Trade Policy Uncertainty, Offshoring, and the Environment: Evidence from US Manufacturing Establishments," IZA Discussion Papers 15919, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp15919
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    More about this item

    Keywords

    pollution haven hypothesis; toxics release inventory; pollution emissions; trade and environment; trade policy uncertainty; offshoring; particulate matter; PNTR;
    All these keywords.

    JEL classification:

    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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