The clean-up of Chinese manufacturing: examining the role played by changing techniques of production

We document the recent reductions in the pollution intensity of Chinese manufacturing and utilise the methods developed and applied by Levinson (2009, 2015) and Brunel (2017) to explain the underlying causes of this pollution clean-up. We find that, unlike in the US, compositional changes to the Chinese manufacturing sector have actually increased pollution emissions. This implies that the observed reductions in pollution intensities have been caused by large improvements in techniques of production driven by technology and/or regulations. The dominance of the technique effect in driving down pollution intensities is found whether we measure an ‘indirect’ technique effect or a direct effect using Laspeyres and Paasche indices.