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The Impacts of Environmental Regulation on Industrial Activities: Evidence from a Quasi-Natural Experiment in Chinese Prefectures

Author

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  • Bin Chen

    (School of Economics, Renmin University of China, Beijing 100872, China)

  • Yuk-shing Cheng

    (Department of Economics, Hong Kong Baptist University, Kowloon Tong, Hong Kong 999077, China)

Abstract

We assess the effectiveness of China’s Two Control Zones (TCZ) policy, an environmental policy that tightens the control of acid rain and the emission of sulfur dioxide (SO 2 ) in targeted areas. To identify the effect of the policy on industrial activities, we use the difference-in-differences (DID) method to study industry-level activities in China’s prefectures based on a unique firm-level data set covering the period from 1999–2009. We find that stricter environmental regulation led to a lower level of polluting industrial activities in TCZ prefectures, which was associated with more closures of polluting firms in targeted prefectures and more new polluting firms in non-targeted locations. In addition, our findings suggest that the TCZ policy had more pronounced effects in the coastal areas and became more effective after China changed its assessment criteria for the performance of local officials in the late 2000s.

Suggested Citation

  • Bin Chen & Yuk-shing Cheng, 2017. "The Impacts of Environmental Regulation on Industrial Activities: Evidence from a Quasi-Natural Experiment in Chinese Prefectures," Sustainability, MDPI, vol. 9(4), pages 1-19, April.
    • Handle: RePEc:gam:jsusta:v:9:y:2017:i:4:p:571-:d:95351
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    Cited by:

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    3. Ping Guo & Jin Li & Jinsong Kuang & Yifei Zhu & Renrui Xiao & Donghao Duan & Baocong Huang, 2022. "Low-Carbon Governance, Fiscal Decentralization and Sulfur Dioxide Emissions: Evidence from a Quasi-Experiment with Chinese Heavy Pollution Enterprises," Sustainability, MDPI, vol. 14(6), pages 1-24, March.
    4. Chen, Dengke & Chen, Shiyi & Jin, Hao & Lu, Yulin, 2020. "The impact of energy regulation on energy intensity and energy structure: Firm-level evidence from China," China Economic Review, Elsevier, vol. 59(C).
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    8. Feng Liu & Kangning Xu & Meina Zheng, 2018. "The Effect of Environmental Regulation on Employment in China: Empirical Research Based on Individual-Level Data," Sustainability, MDPI, vol. 10(7), pages 1-23, July.
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    10. Fayyaz Ahmad & Muhammad Umar Draz & Lijuan Su & Ilhan Ozturk & Abdul Rauf, 2018. "Tourism and Environmental Pollution: Evidence from the One Belt One Road Provinces of Western China," Sustainability, MDPI, vol. 10(10), pages 1-22, September.
    11. Fan, Maoyong & Jiang, Hanchen & Zhou, Maigeng, 2023. "Beyond particulate matter: New evidence on the causal effects of air pollution on mortality," Journal of Health Economics, Elsevier, vol. 91(C).
    12. Yituan Liu & Qihang Li & Zheng Zhang, 2022. "Do Smart Cities Restrict the Carbon Emission Intensity of Enterprises? Evidence from a Quasi-Natural Experiment in China," Energies, MDPI, vol. 15(15), pages 1-20, July.
    13. Xiaoshu Xu & Yingying Cheng & Xuechen Meng, 2022. "River Chief System, Emission Abatement, and Firms’ Profits: Evidence from China’s Polluting Firms," Sustainability, MDPI, vol. 14(6), pages 1-16, March.
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    15. Ruiqian Li & Ramakrishnan Ramanathan, 2018. "Impacts of Industrial Heterogeneity and Technical Innovation on the Relationship between Environmental Performance and Financial Performance," Sustainability, MDPI, vol. 10(5), pages 1-25, May.

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