In a trade model incorporating within-firm productivity differences in intermediate products, we show that specialization in the production of intermediate products enabled by decreased trade costs can reduce firm-level emissions. Using firm-level data from China (1998-2012), we provide...

Exploiting a change in policy governing the entry of foreign direct investment (FDI) in 2002, we apply the difference-in-differences model to estimate the effect of FDI on the product scope of domestic Chinese firms. In industries that experienced relaxation in FDI regulations, the average...

We develop a stylized trade model showing that lower trade costs can reduce firm-level emissions by encouraging firms to specialize in their most productive intermediate products. This mechanism operates through changes in within-firm product composition rather than industry-level reallocation....