Essays on Trade, Pollution, Innovation and Firm Performance
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This dissertation encompasses three essays that explore the intersection of environmental economics, development economics, and the economics of innovation and networks. The research investigates the influence of collective reputation, export tax rates and knowledge spillovers on firm performance, with a particular emphasis on firm environmental performance in the last two essays. The first essay evaluates how collective reputational forces affect firm exporting performance. The existence of collective reputation implies an important externality. Among firms trading internationally, quality shocks about one firm's products could affect the demand of other firms from the same origin country. My co-authors and I study such reputation spillover in the context of a large-scale scandal that affected the Chinese dairy industry in 2008. Leveraging detailed firm-product level administrative data and official quality inspection reports, we document sizable reputation spillovers on uncontaminated firms. We further investigate potential mechanisms that could mediate the strength of collective reputation, including information accuracy, observability of the supply chain and prior export experience. In the second essay, I investigate the impact of export tax rates on firms' pollution and energy usage outcomes in both "dirty" and "clean" product markets. Leveraging a value-added tax (VAT) rebate rate reform in 2004, which nearly doubled average export tax rates (measured by real VAT rates) across all products, I analyze the effects of increasing tax rates on pollution- and energy-intensive "dirty" products. The results reveal that higher tax rates on exporting products lead to a substantial reduction in the export flows of "dirty" products and a corresponding decrease in firms' pollution levels, as reflected by industrial waste water discharge. Interestingly, over the long term, firms adapt to the higher tax rates on "dirty" products by adjusting their product mix, shifting towards cleaner, non-pollution and non-energy-intensive products in the export market. The third essay studies the environmental implications of network-mediated knowledge spillovers in the context of climate change. Using a dynamic co-patenting R&D network of global publicly listed firms and firm-level carbon emissions data, this essay examines how knowledge spillovers between firms influences their carbon emissions. The knowledge is classified into two types: general industrial knowledge and low-carbon technological knowledge. Firms possess stocks of both knowledge types based on their past patent filings and receive knowledge spillovers from their direct network neighbors, with the intensity of spillovers depending on the extend of past patent collaborations. To address potential endogeneity issues arising from unobservable factors driving both R&D activities and carbon emissions, the study adopts an instrumental variable strategy based on previous literature. Spillover measures are instrumented with the knowledge stocks of firms located at a proper distance in the network topology. The estimation results reveal that general knowledge spillovers lead to an increase in firm carbon emissions, while low-carbon knowledge spillovers result in a decrease in carbon emissions. Furthermore, the study explores the mechanism behind these results and finds evidence suggesting that firms engage in "selective learning," adjusting their knowledge acquisition based on specific circumstances. In countries with higher carbon emission costs, knowledge spillovers favor carbon emission reductions.
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Gerarden, Todd