IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v38y2021ics1544612319312140.html
   My bibliography  Save this article

Does a designed financial system impact polluting firms’ employment? Evidence of an experimental economic policy

Author

Listed:
  • Zhang, Dongyang

Abstract

By examining both high- and low-polluting firms, this paper uncovers the causal effect of an environmental-protection-related financial policy on the employment of firms. Using extensive dynamic panel data of Chinese manufacturing firms, I employ the difference in differences (DID) method to resolve the endogeneity problem and uncover the identification. My identifications show that high-pollution firms’ employment decreased when the green loan policy was implemented. This is caused by higher financial costs and financial constraints which high pollution firms are challenged with. Furthermore, in this investigation the underlying mechanism for the decrease in employment are analysed. The findings show that the decrease in employment can be attributed to the crowding-out effect of investments in fixed and intangible assets. Finally, this study shows that the green loan policy shock and the resulting decrease in employment has a more severe impact on capital-intensive and high-wage firms.

Suggested Citation

  • Zhang, Dongyang, 2021. "Does a designed financial system impact polluting firms’ employment? Evidence of an experimental economic policy," Finance Research Letters, Elsevier, vol. 38(C).
    • Handle: RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319312140
    DOI: 10.1016/j.frl.2020.101500
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612319312140
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2020.101500?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Zhang, Dongyang & Du, Pengcheng & Chen, Yaowen, 2019. "Can designed financial systems drive out highly polluting firms? An evaluation of an experimental economic policy," Finance Research Letters, Elsevier, vol. 31(C).
    2. Shi, Min, 2019. "Overinvestment and corporate governance in energy listed companies: Evidence from China," Finance Research Letters, Elsevier, vol. 30(C), pages 436-445.
    3. Mark J. Garmaise, 2008. "Production in Entrepreneurial Firms: The Effects of Financial Constraints on Labor and Capital," The Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 543-577, April.
    4. Hu, Shiwei & Gong, Di, 2019. "Economic policy uncertainty, prudential regulation and bank lending," Finance Research Letters, Elsevier, vol. 29(C), pages 373-378.
    5. Acemoglu, Daron, 2001. "Credit market imperfections and persistent unemployment," European Economic Review, Elsevier, vol. 45(4-6), pages 665-679, May.
    6. Etienne Wasmer & Philippe Weil, 2004. "The Macroeconomics of Labor and Credit Market Imperfections," American Economic Review, American Economic Association, vol. 94(4), pages 944-963, September.
    7. repec:hal:wpspec:info:hdl:2441/8622 is not listed on IDEAS
    8. Zhang, Dongyang & Zheng, Wenping, 2019. "Less financial constraints, more clean production? New evidence from China," Economics Letters, Elsevier, vol. 175(C), pages 80-83.
    9. Zhang, Dongyang & Zhuge, Liqun & Freeman, Richard B., 2020. "Firm dynamics of hi-tech start-ups: Does innovation matter?," China Economic Review, Elsevier, vol. 59(C).
    10. Zhang, Dongyang & Liu, Deqiang, 2017. "Determinants of the capital structure of Chinese non-listed enterprises: Is TFP efficient?," Economic Systems, Elsevier, vol. 41(2), pages 179-202.
    11. repec:hal:spmain:info:hdl:2441/8622 is not listed on IDEAS
    12. Philippe Weil & Etienne Wasmer, 2004. "The macroeconomics of credit and labor market imperfections," ULB Institutional Repository 2013/13436, ULB -- Universite Libre de Bruxelles.
    13. Wang, Xingchun, 2018. "Valuing executive stock options under correlated employment shocks," Finance Research Letters, Elsevier, vol. 27(C), pages 38-45.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tao, Nan & Wu, Tiantian & Yan, Guo, 2024. "To the test of economic recovery: The swings in energy resource prices," Resources Policy, Elsevier, vol. 89(C).
    2. Xiao, He, 2022. "Environmental regulation and firm capital structure dynamics," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 770-787.
    3. Xiaojie Yu & Duminda Kuruppuarachchi & Sriyalatha Kumarasinghe, 2024. "Financial development, FDI, and CO2 emissions: does carbon pricing matter?," Applied Economics, Taylor & Francis Journals, vol. 56(25), pages 2959-2974, May.
    4. Qi, Wenhao & Li, Biao & Liu, Qiqi & Lv, Jiaqi, 2023. "Low-skill lock-in? Financial resource mismatch and low-skilled labor demand," Finance Research Letters, Elsevier, vol. 55(PB).
    5. Tang, Le & Sun, Shiyu, 2021. "How does leader self-deprecating humor affect creative performance? The role of creative self-efficacy and power distance," Finance Research Letters, Elsevier, vol. 42(C).
    6. Zhang, Dongyang, 2021. "Green credit regulation, induced R&D and green productivity: Revisiting the Porter Hypothesis," International Review of Financial Analysis, Elsevier, vol. 75(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zhang, Dongyang, 2022. "Does the green loan policy boost greener production? – Evidence from Chinese firms," Emerging Markets Review, Elsevier, vol. 51(PB).
    2. Boustanifar, Hamid, 2014. "Finance and employment: Evidence from U.S. banking reforms," Journal of Banking & Finance, Elsevier, vol. 46(C), pages 343-354.
    3. Spiros Bougheas & Richard Upward, 2013. "Endogenous participation in imperfect labor and capital markets," Economics Bulletin, AccessEcon, vol. 33(4), pages 2454-2464.
    4. Dromel, Nicolas L. & Kolakez, Elie & Lehmann, Etienne, 2010. "Credit constraints and the persistence of unemployment," Labour Economics, Elsevier, vol. 17(5), pages 823-834, October.
    5. Imen Ben Mohamed & Marine Salès, 2015. "Credit imperfections, labor market frictions and unemployment: a DSGE approach," Working Papers hal-01082491, HAL.
    6. Ruibo Jiang & Wenjing Fan, 2022. "Inclusive finance and employment: Can financial development improve peasant's entrepreneurship?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(3), pages 630-646, April.
    7. Becsi, Zsolt & Li, Victor E. & Wang, Ping, 2013. "Credit mismatch and breakdown," European Economic Review, Elsevier, vol. 59(C), pages 109-125.
    8. Horst Feldmann, 2010. "Venture Capital Availability and Labor Market Performance in Industrial Countries: Evidence Based on Survey Data," Kyklos, Wiley Blackwell, vol. 63(1), pages 23-54, February.
    9. Sergio Destefanis & Giuseppe Mastromatteo, 2009. "Labor-market Performance in the OECD--An Assessment of Recent Evidence," Economics Working Paper Archive wp_559, Levy Economics Institute.
    10. Imen Ben Mohamed & Marine Salès, 2015. "Credit imperfections, labor market frictions and unemployment: a DSGE approach," Working Papers hal-01082471, HAL.
    11. Marlène Isoré, 2011. "International Propagation of Financial Shocks in a Search and Matching Environment," FIW Working Paper series 068, FIW.
    12. Hristov, Atanas, 2015. "The high sensitivity of employment to agency costs: The relevance of wage rigidity," Journal of Macroeconomics, Elsevier, vol. 45(C), pages 137-154.
    13. Zhang, Yahong, 2018. "Financial factors and labor market fluctuations," Economic Modelling, Elsevier, vol. 74(C), pages 24-44.
    14. Unel, Bulent, 2018. "Offshoring and unemployment in a credit-constrained economy," Journal of International Economics, Elsevier, vol. 111(C), pages 21-33.
    15. Isoré, Marlène, 2016. "International propagation of financial shocks in a search and matching environment," Bank of Finland Research Discussion Papers 28/2016, Bank of Finland.
    16. El-Bourainy Mehry & Salah Ashraf & ElSherif Marwa, 2021. "The Impact of Financial Inclusion on Unemployment Rate in Developing Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 11(1), pages 79-93.
    17. Nicolas Petrosky-Nadeau, 2014. "Credit, Vacancies and Unemployment Fluctuations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(2), pages 191-205, April.
    18. Bruno Amable & Lilas Demmou & Donatella Gatti, 2006. "Institutions, unemployment and inactivity in the OECD countries," PSE Working Papers halshs-00590495, HAL.
    19. Wesselbaum, Dennis, 2019. "Jobless recoveries: The interaction between financial and search frictions," Journal of Macroeconomics, Elsevier, vol. 61(C), pages 1-1.
    20. Horst Feldmann, 2013. "Real Interest Rate and Labor Market Performance around the World," Southern Economic Journal, John Wiley & Sons, vol. 79(3), pages 659-679, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319312140. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.