 The geography of pollution regulation and productivityYing Chen, Wenjie Wu and Yanwen Yun Journal of Environmental Economics and Management, 2025, vol. 131, issue C Abstract: This paper examines the impact of China's 1998 “Two Control Zones” (TCZ) policy on firm productivity and local economies using geolocated micro data. The analysis relies on an instrumental variable based on engineering considerations related to pollution emissions. We find that the TCZ policy led to the exit of low-productivity firms and reduced ten-year productivity growth among surviving firms. These surviving firms adjusted by reducing coal consumption, altering their product mix, and increasing innovation activities, resulting in significant transitional costs. The negative effects are disproportionately larger for initially high-productivity firms that engage more actively in abatement efforts. The adverse impact is amplified in counties with closely related industries and strong vertical linkages. These findings highlight the uneven distributional costs of place-based environmental regulations. Keywords: Environmental regulation; Firm performance; Economic geography (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:131:y:2025:i:c:s009506962500018x DOI: 10.1016/j.jeem.2025.103134 Access Statistics for this article Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates More articles in Journal of Environmental Economics and Management from Elsevier |
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