1. 40th Annual IAEE International Conference
The Effects of Energy Related Environmental Regulation on Exporters' Exiting Behavior: The Evidence from China
Dongmei Tu
Yao Li
Shaoxin Wang

2. Outline Motivation Related Literature Methodology and Data
Analysis and Results
Conclusion

3. Pollution Events All Over the World in 20th
Background
Pollution Events All Over the World in 20th SA NA
Hawaii
Africa
Europe
Asia
Oceania
Source: Baidu.com

4. Background
图片来源：世界卫生组织

5. Motivation Environment Protection Policies
Provisional Regulations on Direction Guide to Foreign Investment, 2002
Measures for the Administration of Charging Rates for Pollutant Discharge Fees, 2003
Cleaner Production Promotion Law of the PRC, 2003
Environmental Administrative Penalty Measures, 2010
The Environmental Protection Law of the PRC, 2015
Atmospheric Pollution Prevention and Control Law of the PRC, 2016

6. Two Control Zones (1)
The Air Pollution Prevention and Control Law of the People’s Republic of China (APPCL) was enacted in and executed in 1988.
“Acid Rain Control Areas and SO2 Pollution Control Areas” policy was put into effect in 1998.
155/380 prefecture-cities, 11.4% of territory
40.6% population, 62.4% GDP,
58.9% SO2 emissions in 1995

7. Two Control Zones (2) Selected Regions: 155 cities.
Higher standards of fuel quality for all firms and higher standards of emissions control for pollution-intensive industries in TCZs.
Shut down or upgrade high-pollution coal-related production.
More environmentally friendly industry structure.
Emission fees: Stricter and more efficient.

8. The Problems
Will firms exit export market under the enhanced environment protection?
Exports have made important contributions to China’s economic development.
Stricter pollution control may raise firms’ cost and hurt their comparative advantage.

9. Related Literature Impacts on exports
Operation cost (Greenstone et al., 2012)
Productivity (Hamamoto, 2006)
Impact on export volumn (Herring & Poncet, 2014)

10. Data Source National Bureau of Statistics of China provides:
Chinese City Statistical Yearbook ( )
Financial Information Database for Chinese industrial enterprises ( )
State Council’s official document:
List of Two Control Zones

11. Data Cleaning and Problems
Abnormal data excluded
Matching firms with the same(similar) firm name and the same zip code and sector ID.
Only SOEs and private firms with sales greater than 500 million.

12. Definition of Exporter Status
New exporters. If a firm does not export in year t-1 and all years before, but export in year t, we defined the firm as a new exporter.
Continuous exporters. If a firm exports in both year t-1 and t, we define the firm as a continuous exporter.
Export exit. If a firm export in year t and do not export in year t+1 and t+2, we define that the firm exit the export markets.

13. Descriptive Analysis Year Number of firms Number of export firms
Continuous/Export
Intermittent/Export
New export/
Export exit/
All firms
Export
1999
126577
32846
0.259
0.677
0.033
0.309
0.208
2000
124560
34470
0.277
0.695
0.022
0.247
0.234
2001
137711
38390
0.279
0.635
0.024
0.311
0.172
2002
150214
43258
0.288
0.693
0.019
0.257
0.156
2003
167595
48726
0.291
0.702
0.023
0.258
0.222
2004
240826
74021
0.307
0.475
0.489
0.227
2005
236638
72002
0.304
0.734
0.037
0.220
0.161
2006
263214
75684
0.757
0.020
0.179
2007
296823
76449
0.771
0.191
0.265
2008
367431
85325
0.232
0.619
0.346 --

14. Methodology
Logit model similar to Girma et al.(2003) but with a regulation variable incorporated.
Factors
Variables
Measurement
Firm Age
lnage
year-starting year +（12 - starting month + 1）/12
Firm Scale
lnl
Ln(Average Annual # of Workers)
Total Factor Productivity
tfp
Calculated based on Olley-Pakes (1996) production function
Capital Intensity
lnfk_pc
Total Fixed Capital/Average Annual # of Workers
Wage Level
lnw_pc
Total Wage Paid/Average Annual # of Workers
Entry Cost/Openness
incost
Output of FDIE in the City/Total Output of the City
Foreign Invested
fdie
Based on the firm type registered with government
Pollution Intensity
pollution
=1 if belongs to pollution intensive industry；=0, otherwise
Exporter Type
PEX / REX
PEX=1 if export/sales >= 90%,
REX = 1 if 0<export/sales<90%
Environment Regulation
TCZ
=1 if belongs to Two Control Zones；=0, otherwise

15. Export Exit Rate for Different Types Enterprises (1999-2007)
Export Exit Rate of All Exporters
Export Exit Rate for Different Types Enterprises ( )
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
YEAR
ALL
TCZ
NOT-TCZ
POLLUTION
NOT-POLLUTION
PEX EX
1999
0.208
0.205
0.216
0.201
0.222
0.202
0.175
0.226
0.219
0.254
0.286
0.246
0.171
0.227
2000
0.234
0.239
0.195
0.256
0.199
0.244
0.283
0.304
0.269
0.311
0.277
0.290
2001
0.172
0.164
0.178
0.139
0.194
0.161
0.132
0.188
0.221
0.240
0.204
0.248
0.185
0.236
2002
0.156
0.148
0.158
0.133
0.168
0.146
0.120
0.174
0.232
0.203
2003
0.213
0.212
0.176
0.228
0.238
0.281
0.303
0.285
0.308
0.276
0.267
0.282
2004
0.220
0.252
0.186
0.251
0.275
0.307
0.294
0.310
0.266
2005
0.181
0.129
0.149
0.126
0.191
0.215
0.225
0.183
0.144
0.200
2006
0.179
0.122
0.224
0.138
0.113
0.348
0.415
0.125
0.461
0.327
0.116
0.425
2007
0.265
0.257
0.280
0.296
0.237
0.264
0.332
0.372
0.301
0.392
0.322
0.336

16. Export Exit Rate for Different Types FDI Enterprises (1999-2007)
Export Exit Rate of FDI
Export Exit Rate for Different Types FDI Enterprises ( )
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
YEAR
ALL
TCZ
NOT-TCZ
POLLUTION
NOT-POLLUTION
PEX EX
1999
0.118
0.115
0.127
0.117
0.133
0.112
0.099
0.149
0.168
0.148
0.174
0.145
0.129
0.159
2000
0.132
0.143
0.114
0.126
0.137
0.158
0.059
0.150
0.164
0.184
0.144
2001
0.122
0.092
0.138
0.110
0.095
0.142
0.165
0.172
2002
0.083
0.079
0.082
0.085
0.080
0.078
0.067
0.093
0.121
0.123
0.176
0.104
0.120
2003
0.116
0.108
0.182
0.226
0.167
0.175
2004
0.171
0.173
0.186
0.146
0.191
0.210
0.246
0.244
0.202
0.183
0.221
2005
0.102
0.101
0.106
0.098
0.091
0.111
0.109
2006
0.090
0.081
0.094
0.105
0.124
0.135
0.139
2007
0.235
0.227
0.249
0.260
0.222
0.236
0.306
0.297
0.303
0.294
0.308
0.288
0.325

17. Regression Analysis - All Exporters
FDI
NOT-FDI
Variable
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
Firm age
0.311
***
0.472
0.462
0.277
0.278
0.210
0.243
0.323
0.294
0.177
0.154
0.178
Firm size
-0.303
-0.367
-0.363
-0.307
-0.290
-0.301
-0.361
-0.351
-0.279
-0.278
TFP
-0.099
-0.144
-0.141
-0.233
-0.227
-0.249
-0.256
-0.270
-0.221
-0.235
Capital intensity
-0.007
-0.009 *
-0.010
-0.025 **
-0.042
-0.014
-0.027
-0.006
-0.023
Wage level
-0.266
-0.440
-0.409
-0.179
-0.176
-0.098
-0.180
-0.076
-0.087
-0.101
-0.107
export cost
-0.610
-0.229
-0.222
-0.181
-0.217
-0.223
-0.285
-0.286
-0.016
-0.018
TCZ
-0.060
0.025
-0.068
-0.030
-0.247
-0.281
-0.254
0.030
0.012
0.070
FDIE
-0.479
FDIE*TCZ
-0.211
PEX
-0.558
-0.523
-0.499
PEX*TCZ
0.091
0.161
0.084
Pollution
1.692
1.818
1.522
Pollution*TCZ
-0.124
0.038
-0.154
Year dummies no
Yes
Industry & Province dummies
Observations
258727
257522
76356
181166
Log likelihood
-28572
-28518
-88991
-88735
-88986

18. Robustness Check Difference in difference estimations.
Randomly sampling.
Clustered standard errors.
Propensity Score matched estimation.

19. Conclusions
On average, the stricter environmental regulation has not significantly caused more export exit in TCZs than in non-TCZs.
The export exiting behavior of pure exporters, especially domestic pure exporters show evidence of pollution haven hypothesis.
However foreign invested exporters show evidence for Pollution Halo hypothesis.

20. Thank You！