Social Science Research Council

"The Impact of Globalization on Environmental Choices: Evidence from Brazilian Manufacturing Firms"

The anti-globalization movement has claimed that trade openness and increasing foreign direct investment undermine environmental standards in developing countries. Defenders of globalization, on the other end, suggest that developing countries will become cleaner through technology diffusion from imports, multinationals, and the adoption of international standards. Despite this controversy, there exists very little rigorous evidence of the impact of economic globalization on environmental outcomes in developing countries. This project focuses on the effects of globalization on industrial pollution and test the hypothesis that economic globalization improves the environmental behavior of firms affected by trade openness and foreign direct investment. The research design is based on a comparison of the change in the environmental behavior of firms that become exporters or/and foreign owned with firms that only produce for the domestic market. To identify this change, I use data from before and after the large 1999 depreciation of the Brazilian currency. To further understand the environmental motivations that firms face with globalization, I conduct interviews with managers of firms that recently started to export and/or became owned by foreign capital in order to assess how and why their environmental practices changed.