Trade and pollution: Evidence from India

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.