This paper studied the relationship between intra-industry trade and environmental quality in China''s manufacturing industry. We used panel data from 26 industries for twelve years for panel data regression.
First, we use CCR model of DEA method to build the Environmental Pollution Index (EPI). We made EPI by subtracting the ML (Malmquist -Luenberger) index from M (Malmquist index). Secondly, from the perspectives of scale effect, composition effect, technology effect and selection effect, we made a theoretical analysis of intra-industry trade and environmental quality. In particular, following to Roy (2015), we also treat the GL index as an intra-industry trade variable and conduct regression analysis of the EPI index with the control variables such as FDI and trade liberalization. Third, we also empirically analyzed the impact of Beijing Olympic environmental regulation on environmental performance indicators through the technical effect of intra-industry trade, especially considering the differences between pollution-intensive industries and less-pollution -intensive industries. Lastly, we did the empirical analysis by using the EPI calculated by BCC model and the SBM model.
From the regression analysis, we found the following result. First of all, from the aspects of scale effect, composition effect, technology effect and selection effect of China''s trade, the scale effect has the bad effects on the environment, while the composition effect, the technology effect and the selection effect have a good impact on the environment of China. This is consistent with what we expect from theoretical research. Second, similar to Roy (2017), the intra-industry trade index has had a good effect on the environment in China. Trade liberalization and foreign direct investment have also had a positive impact on China''s environment. Third, the environmental regulation effect of the Beijing Olympic Games has had a good impact on the environment in China. Especially in the CCR model, there is no difference between the pollution-intensive industries and less pollution-intensive industries. In the BCC model and the SBM model, the Beijing Olympic environmental regulation effect were shown to have better results in the pollution-intensive industries, while in the less pollution-intensive industries, no environmental effect has been found.