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Environmental regulation and manufacturing employment: Evidence from China's Eleventh Five-Year Plan

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  • Liao, Jiaqi
  • Zhang, Ning

Abstract

This paper employs a difference-in-difference-in-differences (DDD) identification strategy to investigate the impact of environmental regulation on employment in the manufacturing sector in China, using the country's Eleventh Five-Year Plan (FYP) as a quasi-experiment. Our results indicate that the 11th FYP had a significant negative impact on firm employment, with every 10% increase in SO2 reduction targets resulting in a 3.1% decrease in employment for firms in high-pollution industries. This corresponds to a reduction of approximately 9 people per firm. Our findings indicate that firms primarily reduce SO2 emissions by reducing production levels and transitioning to cleaner energy sources. Additionally, we show that political promotion incentives played a role in driving the decline in employment. Heterogeneous tests reveal that the impact was more significant for private firms, SMEs and trade-exposed firms.

Suggested Citation

  • Liao, Jiaqi & Zhang, Ning, 2024. "Environmental regulation and manufacturing employment: Evidence from China's Eleventh Five-Year Plan," China Economic Review, Elsevier, vol. 87(C).
    • Handle: RePEc:eee:chieco:v:87:y:2024:i:c:s1043951x24001159
    DOI: 10.1016/j.chieco.2024.102226
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    More about this item

    Keywords

    Environmental regulation; Employment; Manufacturing firm;
    All these keywords.

    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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