【Topic】
Carbon emission trading system and firm dynamics in China
【Host】
Prof. YOU Jiaxing, professor of Department of Finance, School of Management, Xiamen University
【Abstract】
This paper studies how the carbon emission trading system (ETS) pilot policy announced in 2011 affects firm dynamics, including entry, exit, and innovation. Using a difference-in-difference-in-differences empirical strategy, we find that in pilot cities, in targeted sectors, and after the policy is announced, there are significantly less entry and exit, but more patent applications related to low-carbon technologies. The positive effects on patent applications are more pronounced in larger, older, and private firms, which correspond to the selection effect. The effects of the regulation diffuse in input-output networks, leading to more patent applications in upstream and downstream sectors. The positive effects on innovation are also larger at aggregate level than those at individual level, due to the selection effects of the policy. These facts can be rationalized by a firm-dynamics model with input-output linkages. We structurally estimate the model and conduct a series of policy experiments. The positive effects of ETS on growth and welfare are amplified in the presence of input-output networks.
【Speaker】
SHI Xiangyu
Doctor of Economics, Yale University
