Exporting and environmental performance: Where you export matters

Empirical analyses that rely on micro-level panel data have found that exporters are generally less pollutant than non-exporters. While alternative explanations have been proposed, firm-level data has not been used to examine the role of destination markets behind the relationship between exports and pollution. In this paper, we argue that because consumers in high-income countries have higher valuations for clean environments than consumers in developing countries, exporters targeting high-income countries are more likely to improve their environmental outcomes than exporters targeting destinations where valuations for the environment are not high. Using a panel of firm-level data from Chile we find support to this hypothesis. A 10 percentage point increase in the share of exports to high-income countries is associated with a reduction in CO2 pollution intensity of about 16%. The results have important implications for firms in developing countries aiming to target high-income markets.