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Size control or intensity control: a comparative study of two Common Environmental Regulations

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  • Hongyu Nian

    (Shanghai Jiao Tong University)

  • Chunhua Wang

    (Shanghai Jiao Tong University)

  • Haitao Yin

    (Shanghai Jiao Tong University)

Abstract

This paper compares two common environmental regulations: size control and intensity control. We compare the impacts of the two environmental regulations on firm competitiveness and market structure. Our findings show that size control and intensity control both improve firm competitiveness but through very different mechanisms. Intensity control motivates firms to innovate and develop cost-saving and environmentally friendly input and product portfolios to reduce pollution and improve competitiveness, which is consistent with the Porter hypothesis. In contrast, size control creates no incentive for surviving firms to innovate or reduce pollution, and it acts as a windfall benefit that grants these firms a less competitive market and thus firm competitiveness, a mechanism that is underexplored by the Porter hypothesis. Intensity control also results in a less competitive market but to a much smaller extent than size control. Therefore, intensity control performs better than size control from the perspective of social welfare.

Suggested Citation

  • Hongyu Nian & Chunhua Wang & Haitao Yin, 2022. "Size control or intensity control: a comparative study of two Common Environmental Regulations," Journal of Regulatory Economics, Springer, vol. 61(3), pages 169-190, June.
    • Handle: RePEc:kap:regeco:v:61:y:2022:i:3:d:10.1007_s11149-022-09450-x
    DOI: 10.1007/s11149-022-09450-x
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    2. Xu Ou & Haiwei Jiang, 2023. "The Impact of Environmental Regulation on Firm Performance: Evidence from the Pulp and Paper Industry in China," IJERPH, MDPI, vol. 20(4), pages 1-18, February.

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