Three chapters on Environmental Regulation, Pollution, and Trade Liberalization

The dissertation consists of three chapters in environmental economics and international trade. The first chapter identifies the effects of environmental regulation on Chinese manufacturing firms\u27 markups. Difference-in-difference and triple-differenced estimates show that more stringent environmental regulation decreases firms\u27 markups. Furthermore, environmental regulation has a significant impact on non-exporters\u27 markups, but it has no impact on exporters. Examining pre-trends, we find that SOEs did not change their behavior in anticipation of environmental regulation, but non-SOEs started to adjust before the regulation was implemented. The second chapter evaluates how the market size affects the impact of environmental stringency on firms\u27 economic activity. The empirical example and theoretical model imply that the relative abatement pollution cost has a deterrent impact on foreign direct investment inflows to China’s provinces. The results also indicate that the impact of environmental regulation is weaker in the large region but stronger in the small region. The third chapter examines the effects of import competition from China on environmental performance in the US at both industry and commuting-zone levels. The main results indicate that the US import exposure from China significantly decreases pounds released and hazard at the industry level. I construct the difference between actual and counterfactual emissions. Results suggest that Chinese import competition results in losses of 35.7 million and 82.9 million pounds released over two subperiods 1991-1999 and 1999-2007. It also results in losses of 0.714 trillion and 2.29 trillion units in hazard over these two periods. Using data at the commuting-zone level, I find the US import exposure from China decreases pounds released per employment and hazard per employment but the estimates are statistically insignificant