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The Porter Hypothesis Goes to China: Spatial Development, Environmental Regulation and Productivity

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  • Pedro Naso
  • Yi Huang Author Name: Tim Swanson

Abstract

We examine the relationship between environmental regulation and competitiveness in China. Exploiting exogenous changes in national pollution standards for three industries—ammonia, paper and cement—we test whether environmental regulation increases industry productivity. Our results show that the strong version of the Porter hypothesis does not hold, but that regulation might reallocate productivity spatially. We show that regulated industries that are located in newly developing cities see an increase in their productivity as compared to the same industries in other cities. This means that environmental regulation is more likely to drive the spatial distribution of productivity changes than it is to drive the pace and direction of technological change.

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  • Pedro Naso & Yi Huang Author Name: Tim Swanson, 2017. "The Porter Hypothesis Goes to China: Spatial Development, Environmental Regulation and Productivity," CIES Research Paper series 53-2017, Centre for International Environmental Studies, The Graduate Institute.
    • Handle: RePEc:gii:ciesrp:cies_rp_53
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    More about this item

    Keywords

    Tax competition; Production Technology and Environment and Development;

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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