This paper empirically investigates the Pollution Reduction by Rationalization (PRR) hypothesis in China's context of water pollution. Using firm-level data from 2000 to 2012, the study analyzes the heterogeneous effects of exports on water pollution, considering factors like firm productivity, composition effects, and technique effects. The findings reveal an inverted U-shaped relationship between firm productivity and water pollution, with more productive firms exporting less polluted water after a certain productivity threshold is reached. Intra-industry agglomeration enhances competition and resource reallocation, supporting the PRR hypothesis. Regional disparities in water pollution are also observed, with eastern China exhibiting higher pollution levels.

Tao Song