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Does the Porter hypothesis hold in China? Evidence from the low-carbon city pilot policy

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  • Weiping Shen
  • Yong Wang
  • Weijie Luo

Abstract

Given the constraints of energy, environment, and climate change in the process of economic development, transitioning to a low-carbon economy by such means as the construction of low-carbon cities is a feasible approach to a sustainable development pattern that balances energy conservation, environmental protection, and economic growth. Utilizing the data of listed companies in China A-shares market over the period 2007–2016, we treat China’s low-carbon city pilot policy (LCCPP) as a quasi-natural experiment and adopt a difference-in-differences approach to explore the effect of LCCPP on the total factor productivity (TFP) of firms. Firm TFP is found to be negatively associated with the implementation of LCCPP. Our mechanism analysis reveals that the LCCPP stimulates innovation by firms in China, consistent with the weak Porter hypothesis. Moreover, the negative relationship between the LCCPP and TFP holds more strongly in larger firms or those located in the eastern region.

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  • Weiping Shen & Yong Wang & Weijie Luo, 2021. "Does the Porter hypothesis hold in China? Evidence from the low-carbon city pilot policy," Journal of Applied Economics, Taylor & Francis Journals, vol. 24(1), pages 246-269, January.
    • Handle: RePEc:taf:recsxx:v:24:y:2021:i:1:p:246-269
    DOI: 10.1080/15140326.2020.1858224
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    Cited by:

    1. Qihang Xue & Huimin Wang & Caiquan Bai, 2023. "Local green finance policies and corporate ESG performance," International Review of Finance, International Review of Finance Ltd., vol. 23(4), pages 721-749, December.
    2. Wang, Kaike & Yin, Ru & He, Qiang & Wang, Shuhong, 2024. "Transfer payments and carbon reduction in China: The effect of the national comprehensive demonstration city of energy saving and emission reduction fiscal policy," Energy, Elsevier, vol. 297(C).
    3. Yajun Zhu & Churen Sun, 2022. "Carbon Reduction, Pollution Intensity, and Firms’ Ratios of Value Added in Exports: Evidence from China’s Low-Carbon Pilot Policy," Sustainability, MDPI, vol. 14(19), pages 1-26, October.
    4. Taohong Wang & Zhe Song & Jing Zhou & Huaping Sun & Fengqin Liu, 2022. "Low-Carbon Transition and Green Innovation: Evidence from Pilot Cities in China," Sustainability, MDPI, vol. 14(12), pages 1-21, June.
    5. Lin Ni & Lei Li & Xin Zhang & Huwei Wen, 2022. "Climate Policy and Foreign Direct Investment: Evidence from a Quasi-Experiment in Chinese Cities," Sustainability, MDPI, vol. 14(24), pages 1-19, December.
    6. Yang, Zhenbing & Zhao, Ziyi & Shao, Shuai & Yang, Lili, 2023. "Carbon regulation and enterprise investment: Evidence from China," Energy Economics, Elsevier, vol. 128(C).
    7. Zhiping Song & Peishan Tong, 2022. "The Impact of Environmental Regulation on Human Sustainable Development: Evidence from China," Sustainability, MDPI, vol. 14(19), pages 1-12, September.

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