Consumers and firms located in high-income countries can put pressure on final goods producers or input suppliers in low-income countries to change their technologies and production practices. In fact, an upstream supplier might be more likely to adopt a new technology based on the accumulation of demanders that through the production network directly or indirectly adopt standards on their supply chain. For example, consumers might demand better labour or environmental standards throughout a firm’s supply chain, a practice known as responsible sourcing. Similarly, ‘demand-pull standards’ (DPS), that is quality standards adopted by industry associations or imposed by high-income governments as Non-Tariff Barriers, may induce upstream suppliers to change their production technologies. This is key for policymakers as low-income countries have a larger share of upstream industry than downstream ones, while most industrial emissions are found upstream. Therefore, this project aims to investigate when demand-pull standards induce more technology adoption in low-income countries.
The researcher will develop and calibrate a structural model of global sectoral linkages using the methodology in Liu (2019), and consider the impacts of historical environmental standards and responsible sourcing through these supply chain linkages. He plans on applying the model to greenhouse gas emissions, and calibrating it to investigate green technology adoption. He will use a unique global firm-to-firm linkage dataset that will provide a bridge between macro and micro data: Ecoinvent will provide data on unit processes, whereas Altana.ai will provide matched firm-level inputs and outputs data. Once the model is calibrated, the researcher will test whether the impact of demand-pull policies such as responsible sourcing on upstream suppliers may in fact lead to better emissions outcomes.
This study will deepen our understanding of how green technology adoption can be spurred by demand-pull standards from consumers. It will shed light on the efficacy of production networks as an empirical tool to measure the effects of these factors between sectors. Given that consumers, downstream firms, and governments have limited capacity to make responsible sourcing demands of firms in low-income countries, understanding which sectors should be targeted will be useful to policy implementation.
