Antoine Dechezlepretre (LSE)

"Do pollution offsets offset pollution? Evidence from the Clean Development Mechanism in India"

7 March 2017, 12:00 pm

Abstract

We examine the impact of low-cost imports on firms’ propensity to engage in material-saving (’clean’) innovation and product innovation using a dataset that combines firm-level international trade data with self-reported innovation data for around 9,000 French companies observed from 1998 to 2010. We find robust evidence that a higher share of imports from low wage countries significantly decreases firms’ propensity to engage in ’clean’ technologies but also drastically increases firms’ propensity to develop new products. A one standard deviation increase in the import share of products from these countries decreases firms’ propensity to engage in environmental innovation by up to 7 percentage points and increases firm’s propensity to develop new products by up to 15 percentage points. This suggests that trade with low-cost countries have significantly reduced environmental innovation and considerably increased product innovation during the past 20 years.