Evidence on the Relation Between Importing from Low-wage Countries and Us Domestic Pollution

Abstract: We combine international trade data from the U.S. Census Bureau with Toxics Release Inventory data from the Environmental Protection Agency to investigate the relationship between U.S. firms’ imports from low-wage countries (LWCs) and toxic emissions by their domestic plants. We find that plants release less toxic emissions on American soil and spend less on pollution abatement when their parent firms import more from LWCs. According to our estimates, when a plant’s parent firm increases its share of imports from LWCs by 10 percentage points, the plant’s toxic emissions on American soil decreases by 4.0%, and the plant spends 3.8% less on pollution abatement expenditures. These effects are stronger for plants located in dirtier U.S. counties, where benefits from pollution reduction are expected to be larger. Moreover, goods imported from LWCs are more pollution-intensive than goods imported from the rest of the world. These results provide the first large-sample empirical evidence that U.S. firms offshore both production and pollution to the developing world.