Production Leakage: Evidence from Uncoordinated Environmental Policies
Prof. Alex ZHOU
Associate Professor in Finance
FBA, UM
Date: 24 September 2024 (Tuesday)
Time: 1:00pm to 2:00pm
Venue: FBA Lobby
Abstract
This paper documents that international trade can cause uneven distribution of production opportunities to countries in face of uncoordinated environmental policies. Specifically, we use exogenous introductions of national carbon policy to study how local firms react to such shocks, especially when they make sourcing decisions on carbon inputs. Results show that regulatory carbon taxes lead domestic firms to import more carbon products, such as cement, iron and steel, from foreign producers. Micro evidence further shows that firms will increase their trade shares to foreign suppliers located in pollution haven. Exploiting global supply chain information, we further find that domestic regulatory carbon taxes do benefit foreign carbon suppliers, helping them to, for example, increase fixed investment, expand production scales and improve financial performance. These findings highlight the importance to take into account international trade when forming environmental policies in order to fulfill the growth, welfare and emission reduction goals of such policies.
Speaker
Sili ZHOU currently serves as Associate Professor in Finance at Faculty of Business Administration, University of Macau in Macau, China. He worked as research fellow at APAEM, University of Macau. Before joining the University of Macau, he was an Assistant Professor in Finance at the Fanhai International School of Finance (FISF) and School of Economics (SOE), Fudan University in Shanghai. He has also been a visiting researcher at Bank of Finland in 2024. Professor Zhou’s research interests include international finance, corporate finance and Chinese financial markets. His research has been published in leading academic journals including Journal of International Economics, Journal of the European Economic Association, Journal of Corporate Finance etc. His research is also widely featured in Wall Street Journal, UNIDO, Covid Economics, VoxChina, Fed, BOFIT etc.
All are welcome!
