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Does urban low-carbon governance affect firms’ business decisions for employing capital and labor?

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  • Huaqing Wu
  • Ling Wang
  • Tao Ding
  • Fei Peng

Abstract

This study investigates the impact of urban low-carbon governance on firms’ capital-labor ratio. By treating China’s low-carbon city pilot (LCCP) policy as an urban low-carbon governance instrument, we apply a difference-in-differences method (DID) and find that the LCCP program significantly reduces firms’ capital-labor ratio, but the effect only manifests in state-owned enterprises (SOEs). The mechanism result demonstrates that to intensify urban low-carbon governance, local governments adjusted fiscal expenditure structure, resulting in SOEs employing less capital and more labor. This may be a business strategy adopted by SOEs to avoid environmental regulations, as we find that urban low-carbon governance significantly improves green technology innovation in non-SOEs, but not in SOEs.

Suggested Citation

  • Huaqing Wu & Ling Wang & Tao Ding & Fei Peng, 2024. "Does urban low-carbon governance affect firms’ business decisions for employing capital and labor?," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 67(10), pages 2257-2280, August.
    • Handle: RePEc:taf:jenpmg:v:67:y:2024:i:10:p:2257-2280
    DOI: 10.1080/09640568.2023.2184681
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