Trade and pollution: Evidence from India

TL;DR

This paper examines how India's 1991 trade liberalization impacted water pollution, finding that increased trade exposure led to higher pollution levels in affected districts.

Contribution

It provides empirical evidence linking trade liberalization to environmental pollution in a developing country context, specifically analyzing water pollution in India.

Findings

Larger tariff reductions correlate with increased water pollution.

Median district experienced a 0.11 standard deviation rise in pollution.

Trade liberalization has environmental costs in developing countries.

Abstract

What happens to pollution when developing countries open their borders to trade? Theoretical predictions are ambiguous, and empirical evidence remains limited. We study the effects of the 1991 Indian trade liberalization reform on water pollution. The reform abruptly and unexpectedly lowered import tariffs, increasing exposure to trade. Larger tariff reductions are associated with relative increases in water pollution. The estimated effects imply a 0.11 standard deviation increase in water pollution for the median district exposed to the tariff reform.