Impact of Environmental Regulation on Firm Exports: Evidence from a Quasi-Natural Experiment in China

To estimate the short term effect of environmental regulation on firm exports, this study considers China's 2003 City Air Pollution Prevention and Control Program (CAPPCP) in a quasi-natural experiment with microdata from 2000-2007. Using the difference-in-differences (DID) and matching DID methods, our findings indicate that CAPPCP reduced firm exports by 6.2% and 12.3%, respectively. A mechanism analysis examines the three channels through which CAPPCP affects firm exports: total factor productivity, production costs, and factor endowments. Furthermore, a heterogeneity analysis reveals that non-state-owned firms, small-scale firms, and firms in highly polluting industries have stronger negative responses to environmental regulations.