Research

Peer-reviewed Publications

Unilateral environmental policy and offshoring (with F. Naumann and P. M. Richter)
Journal of International Economics, Vol. 159 (2026), Article 104185.
doi: 10.1016/j.jinteco.2025.104185

This paper analyzes how offshoring shapes the effectiveness of unilateral environmental policies, with a particular focus on its role in driving emissions leakage and influencing global emissions, income, and inequality. By combining standard modeling approaches, we offer new insights into the environmental and economic outcomes of unilateral policies in an open economy, emphasizing the importance of firm heterogeneity.

In our framework, heterogeneous firms allocate labor between production tasks and emissions abatement, with only the most productive firms offshoring to reduce costs. We find that global emissions respond non-monotonically to a unilateral emission tax increase: they decrease when initial tax differences are small but increase—resulting in leakage rates exceeding 100%—when differences are large.

This counterintuitive outcome is driven by a global technique effect, where the cleanest firms relocate production and incumbent offshorers increase emissions due to a weakening foreign effective emissions tax in general equilibrium. Implementing a border carbon adjustment prevents emissions leakage, reduces domestic income inequality but exacerbates inequality between countries.

Work in Progress

General oligopolistic equilibrium: Strategic firm behavior and environmental policy (JMP)
VfS 2025 Annual Conference Paper

Abstract: This paper employs a GOLE model à la Neary and Tharakan (2012) to analyze the impact of a unilateral environmental policy reform on emission leakage, accounting for trade dynamics, oligopolistic competition, and capital-intensive abatement. The model builds on a mechanism by Kreps and Scheinkman (1983): Firms decide on abatement investments in a first stage, affecting their production cost structure, emission intensity, and competition mode (Bertrand or Cournot) in a second stage. The analysis finds that raising the emission tax in one country increases the share of sectors investing in abatement, significantly reducing emissions in both the reforming and the non-reforming country. These are driven primarily by the extensive margin, as additional sectors adopt abatement in response to the reform. At the same time, the unilateral reform entails a downside by increasing oligopolization and reducing competitiveness: global emission reductions come at the cost of weaker competition and lower consumer welfare.

Welfare-optimal policy response to border carbon adjustments: An emerging economy perspective (with J. Gallé)
Forthcoming in UNU-WIDER Working Paper Series (expected January 2026)
Latest version

Abstract: From the perspective of an emerging economy, this paper develops a Melitz-style model of asymmetric countries to investigate optimal environmental policy responses to a Border Carbon Adjustment (BCA) imposed by a trading partner. Analytically, we show that the presence of a BCA reverses the policy's effect on the trading partner's export threshold, allowing more imports and mitigating welfare losses. Using Indian firm-level data, the study estimates that the relative welfare loss of raising Indian carbon pricing to EU levels is 52% lower with a BCA. Accounting for environmental disutility, the BCA increases India’s welfare-optimal emissions tax under low and moderate social cost of carbon (SCC) scenarios, while potentially reducing it under very high SCCs.

Exporting, importing and firm-level emission intensity: The case of India (with S. Kar)

Abstract: Using firm-level data from India on energy inputs and financial performance from 1993 to 2013, this paper analyzes the role of importing foreign intermediates on CO₂ intensities for around 4,000 firms across seven manufacturing sectors. The study uses a staggered difference-in-differences design to examine extensive margin effects. Results indicate that starting to import reduces firm-level CO₂ intensity by roughly 6%, suggesting productivity and technology upgrades, while export entry produces even larger reductions (≈10%). Anticipation effects prior to treatment are also observed.