Industrial dynamics, international trade, environment and innovation

Keywords: industrial dynamics, international trade, environment, CO2 emissions, (green) innovation, patents, emission-reducing technological upgrading

Businesses are facing changing competition, particularly due to international openness, and are adapting to these new conditions, by innovating for instance. Access to very precise data on industrial firms, using national surveys or data from the tax or customs services, allows for a precise analysis of the decisions made by these heterogeneous firms. Thus, we can study sales performed on the different export markets according to the level of competition on these markets, or the decisions made to invest in technology or research (in the form of patents).

In this area of research, it is crucial to ask whether international trade is positive for the environment, or instead the opposite; whether it exacerbates environmental externalities, leading to an increase in CO2 emissions. Hélène Ollivier’s work focuses on this issue. Using data from Indian industrial firms, her work shows, for example, that access to more international markets – thanks to positive demand shocks from countries importing certain types of products – increases production and thus the CO2 emissions of Indian firms, while decreasing the emission intensity per unit of good. This “green” technical progress is identified at the level of the product manufacturing process, using data on energy consumption at the product level, and thus reflects a genuine effort to cut emissions during production.

Another issue raised by Hélène Ollivier concerns the impacts of industrial or environmental regulation (for example, the European carbon market) which would only affect certain firms even though they have market power. In this context, it is important to measure not only the direct impact of regulation on the regulated firms, but also its indirect impacts on other firms that are in competition with the former. This interference between exposed and non-exposed firms requires innovative methodological tools to quantify the impacts of regulation, which is the subject of the research project in question.

Environmental policies or regulations, when they are domestic, are generally excluded from international trade treaties. Nevertheless, they remain subject to the influence of pressure groups active in the sectors they seek to control. These costly domestic political games change the structure of countries’ comparative advantages and may also explain the maintenance of tariff barriers. David Martimort’s studies look at the obstacles preventing trade agreements in such a context.

  • Researchers: Lorenzo Cassi, David Martimort, Helène Ollivier, Angelo Secchi.
  • PhD Students: Martin Jégard, Karin Gourdon, Gabriela Pilay.

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Geoffrey Barrows and Hélène OllivierExports from developing countries and greenhouse gas emissions: the example of Indian firms