Environmental consequences of fair competition: Evidence from China's corporate income tax merger policy

Yu Qi, Shuai Shao, Zhihua Tian, Yang Xu and Jun Yin

Ecological Economics, 2022, vol. 195, issue C

Abstract: An institutional environment of fair competition helps to enhance the economic performance of enterprises, while its potential environmental effects are often ignored. In 2008, China implemented a unified corporate income tax merger policy that set the same tax rate for domestic and foreign-invested enterprises to make the domestic enterprises competitive with foreign-invested enterprises in a fair tax environment. Taking this policy as a quasi-natural experiment, we conduct a difference-in-differences estimation to identify the impact of a fair competition environment on firm-level SO2 emission intensity. The results show that the fair competition environment significantly reduces the SO2 emission intensity of domestic enterprises in China. This finding also remains robust after considering factors such as various settings, metrics, and potential impacts. The possible mechanisms through which this policy shock affects firms' SO2 emission intensity are manifested by reducing corporate tax burdens, alleviating corporate financing constraints, promoting industry competition, elevating the production capacity of enterprises, and reducing the amount of pollutants generated. We also find firm-level SO2 emission intensity responses to fair competition vary with firm ownership, location, and industry pollution intensity. Hence, improving conditions of fairness in the market can bring about a win-win result for both the economy and the environment.

Keywords: Fair competition; Preferential tax policy; Income tax merger policy; Corporate environmental performance; SO2 emission intensity; China (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0921800922000271
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:195:y:2022:i:c:s0921800922000271

DOI: 10.1016/j.ecolecon.2022.107365

Access Statistics for this article

Ecological Economics is currently edited by C. J. Cleveland

More articles in Ecological Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().