Does export liberalization cause the agglomeration of pollution? Evidence from China

This paper investigates the impact of export liberalization on the geographic concentration of water pollution. Data shows that water pollution emissions are unevenly distributed across regions in China. Using China's accession to the World Trade Organization (WTO) as the exogenous shock, we identify a negative causal effect of export liberalization on the agglomeration of water pollution across regions in China. It suggests that relatively more water pollution is discharged in those previously low-pollution regions after export liberalization. We confirm this with data on regional relative pollution emissions. Further decomposition shows that it is the intensive margin (average pollution emission) rather than the extensive margin (number of polluting firms) that drives the deglomeration of water pollution emissions within the liberalized industry. •Investigate the impact of export liberalization on the geographic concentration of water pollution.•Exploit the heterogeneous trade policy uncertainty reductions across industries upon China's WTO accession•Relatively more water pollution is discharged in those previously low-pollution regions after export liberalization.•Further decomposition shows that the intensive margin rather than the extensive margin is the main driving force.