Effects of the preference for environmental quality on the export competition between China and OECD countries

Abstract

This study examines how importers’ preferences for environmentally friendly products influence the effect of China’s export growth on the exports of OECD countries to third markets. The effect of China’s export growth is systematically investigated using the theoretical gravity model, which assumes that importers’ environmental preferences are heterogeneous among countries. A new measure is also proposed to represent importers’ revealed preferences for environmental quality across countries. Panel data consisting of observations for 30 OECD exporting countries and 60 importing countries over the 2000–10 period confirm that the crowding-out effect of China’s export growth on the exports of OECD countries observed in markets for consumption goods and the dampening effect observed in markets for intermediate goods are becoming weaker as the importer preference for environmental quality becomes stronger.