Where You Import Intermediates Matter : Theory and Evidence from Chinese Firms’ Pollution Emissions

Extant analyses discussing trade’s environmental impacts simply use traditional dichotomy to distinguish trade into exporting and importing, failing to take into consideration the heterogeneity of trading partners. However, exiting theories cannot effectively predict the impacts of trading with different countries on ecological environment. To systematically study the role of import source country in the impacts of importing intermediates on pollution emissions, our analyses construct a theoretical model and employ data of Chinese enterprises for empirical tests. Our analyses find importing intermediates from different countries has differential effects on firm’s pollution emissions. Importing intermediate inputs from developed countries will raise productivity and increase abatement investment to a greater extent, thus importing from developed countries has a greater effect on emission intensity reduction than importing from developing countries. Thus, importing intermediate inputs from developed countries or from developing countries cannot significantly change firm’s total emissions