Trade liberalization and the environment: Evidence from NAFTA and U.S. manufacturing

Abstract

The unobserved responses of individual polluters are often used to rationalize the aggregate effects of international trade on the environment. In this paper, I provide the first evidence of these responses. I estimate the effects of NAFTA on the emissions of particulate matter (PM 10 ) and sulfur dioxide (SO 2 ) from manufacturing plants in the United States. My findings suggest that trade liberalization led to significant reductions of these pollutants at affected plants. On average, nearly two-thirds of the reductions in PM 10 and SO 2 emissions from the U.S. manufacturing sector between 1994 and 1998 can be attributed to trade liberalization following NAFTA.

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