Importing, outsourcing and pollution offshoring

Matthew A. Cole*, Robert J.R. Elliott, Toshihiro Okubo, Liyun Zhang

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

Focusing on Japan over the period 1988–2013, this paper provides the first test of the extent to which pollution offshoring has occurred for this major industrial economy. In so doing, we identify whether the composition of domestic production, imports, overall trade patterns and overseas outsourcing has become more or less pollution intensive. We then focus on the role played by overseas outsourcing in pollution offshoring. Utilising a unique dataset of approximately 4000 Japanese firms for the period 2009–13, we use propensity score matching and difference-in-differences to examine how a firm's CO2 emissions intensity is affected by its decision to outsource some of its production overseas. Our results indicate that the composition of Japanese imports appear to have become dirtier and the carbon embodied within Japanese imports is larger and has grown more rapidly than the carbon embodied within exports. We also find that relative to a control group, the growth rate of pollution intensity of firms that begin overseas outsourcing is 7.3 percentage points lower in the year that they start overseas outsourcing and 7.7 percentage points lower in the following year, suggesting that outsourcing is one route through which pollution offshoring is occurring. New importers also experience slower emissions growth but the reduction is less than for new outsourcers.

Original languageEnglish
Article number105562
Number of pages14
JournalEnergy Economics
Volume103
Early online date8 Sep 2021
DOIs
Publication statusPublished - Nov 2021

Bibliographical note

Funding Information:
This study is conducted as a part of the project ?Regional Economies in the New Era of Globalization and Informatization? undertaken at the Research Institute of Economy, Trade and Industry (RIETI). This study utilizes the micro data of the questionnaire information based on the ?Basic Survey of Japanese Business Structure and Activities? which is conducted by the Ministry of Economy, Trade and Industry (METI). The authors would like to thank RIETI and participants at the IPAG Challenges in environmental economics workshop, discussion paper seminar participants at RIETI and participants at the French Economic Association Conference, Orl?ans, France. We would also like to thank Eric Strobl and David Maddison for comments.

Publisher Copyright:
© 2021 Elsevier B.V.

Keywords

  • Difference-in-differences
  • Outsourcing
  • Pollution offshoring
  • Propensity score matching

ASJC Scopus subject areas

  • Economics and Econometrics
  • Energy(all)

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