Environmental standards, trade and innovation:evidence from a natural experiment

Chakraborty, Pavel (2017) Environmental standards, trade and innovation:evidence from a natural experiment. Environment and Development Economics, 22 (4). pp. 414-446. ISSN 1355-770X

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Exploiting a natural experiment involving the imposition of a technical regulation by Germany on Indian leather and textile industries in 1994, a firm-level data set is used to study the trade, adaptation and discontinuity effects and how they vary by firm size. It is found that: (a) regulation significantly increases the export revenues of a firm through use of new technology and high-quality imported raw materials – indicating a possible signalling effect; (b) this gain is concentrated only on the upper half of the firm size distribution, i.e., in the 3rd and 4th quartiles; (c) use of imported raw materials significantly explains low exit probabilities of a firm; and (d) there is evidence of a sorting effect – regulation significantly affecting the operation of small firms.

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Journal Article
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Environment and Development Economics
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08 Jan 2018 16:50
Last Modified:
09 Mar 2022 02:45