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The Impact of Environmental Regulation on the Location of Pollution-Intensive Industries in China under Agglomeration Effect

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  • Yinhao Wu

    (Institute of Economics and Management, Henan Agricultural University, Zhengzhou 450046, China)

  • Shumin Yu

    (Institute of Economics and Management, Henan Agricultural University, Zhengzhou 450046, China)

  • Xiangdong Duan

    (Archival Research Centre, Henan Agricultural University, Zhengzhou 450001, China)

Abstract

Pollution-intensive industries (PIIs) have both scale effect and environmental sensitivity. Therefore, this paper studies how environmental regulation (ER) affects the location dynamics of PIIs under the agglomeration effect. Our results show that, ER can increase the production costs of pollution-intensive firms (PIFs) by internalizing the negative impact of pollutant discharge in a region, and thus, directly reduces the region’s attractiveness to PIFs. Meanwhile, ER can indirectly reduce the attractiveness of a region to PIFs by reducing the externality of the regional agglomeration effect. Moreover, these influences are regulated by the level of local economic development. Based on the moderated mediating effect model, we find evidence from the site selection activities of newly built chemical firms in cities across China. The empirical test shows that compared with 2014, the proportion of the direct effect of ER to the total effects significantly decreased in 2018, while the proportion of indirect effects under the agglomeration effect increased significantly. Our findings provide reference for the government to design effective environmental policies to guide the location choice of new PIFs.

Suggested Citation

  • Yinhao Wu & Shumin Yu & Xiangdong Duan, 2021. "The Impact of Environmental Regulation on the Location of Pollution-Intensive Industries in China under Agglomeration Effect," IJERPH, MDPI, vol. 18(8), pages 1-14, April.
    • Handle: RePEc:gam:jijerp:v:18:y:2021:i:8:p:4045-:d:534467
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    2. Xu Dong & Yali Yang & Qinqin Zhuang & Weili Xie & Xiaomeng Zhao, 2022. "Does Environmental Regulation Help Mitigate Factor Misallocation?—Theoretical Simulations Based on a Dynamic General Equilibrium Model and the Perspective of TFP," IJERPH, MDPI, vol. 19(6), pages 1-21, March.

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