Friday, 12 October 2018: 5:10 PM
Although several studies utilize aggregate (i.e., country- and state-level) data to examine the environmental consequences of trade, firm-level analyses exploring the issue are relatively few. This is particularly striking since firms with and without international linkages have been extensively compared across other dimensions such as productivity and wages. Accordingly, we utilize firm-level data of 22752 firms from a Central Bureau of Statistics of Indonesia survey for 2006 of Indonesian manufacturing establishments to assess the effect of exporting on pollution abatement expenditure. Moreover, due to concerns over endogeneity of exporting status accompanied by the paucity of traditional exclusion restrictions, we rely on a number of novel identification strategies. While two of the approaches use higher moments of the data for identification, the other estimators are aimed at obtaining treatment effects when exclusion restrictions are unavailable. More precisely, the methods are described in Millimet and Tchernis “Estimation of Treatment Effects Without an Exclusion Restriction: with an Application to the Analysis of the School Breakfast Program,” Journal of Applied Econometrics, 2012; Lewbel “Using Heteroskedasticity to Identify and Estimate Mismeasured and Endogenous variables,” Journal of Business and Economic Statistics, 2012; and Klein and Vella “A Semiparametric Model for Binary Response and Continuous Outcomes under Index Heteroskedasticity,” Journal of Applied Econometrics, 2009. Overall, we find exporting to encourage pollution abatement activities. Our findings are largely consistent with contributions such as Batrakova and Davies “Is There an Environmental Benefit to Being an Exporter? Evidence from Firm-Level data,” Review of World Economics, 2012; Holladay “Exporters and the Environment,” Canadian Journal of Economics, 2016; and Roy and Yasar “Energy Efficiency and Exporting: Evidence from Firm-Level Data,” Energy Economics, 2015.