Environmental regulation and employment: Evidence from China's new Environmental Protection Law

Zhuo Li and Yuanqi Li

Economic Analysis and Policy, 2024, vol. 82, issue C, 400-416

Abstract: Realizing environmental protection and employment stability when facing strict environmental regulations is an essential issue of concern for many developing countries, including China. Based on a dataset of Chinese listed companies and a dataset of Chinese individual labor-force surveys, this paper uses an estimation technique pairing propensity score matching with a difference-in-differences estimator to examine the impact of the new Environmental Protection Law (EPL) on the supply and demand of labor at the micro level and the reallocation effect of interindustry labor at the macro level. The results show that the new EPL generated employment losses at the micro level. The policy reduces firms’ labor demand by lowering firms’ output and total investment expenditures and, in the process, does not stimulate firms’ innovative behavior. Moreover, implementing the new EPL reduces the wage income of workers, which in turn reduces the labor supply. Conversely, at the macro level, the new EPL promotes the transfer of labor from polluting to cleaner industries, realizes the reallocation of labor between industries, and thus promotes the transformation and upgrading of regional industrial structure.

Keywords: Environmental regulation; Firm's labor demand; Resident's labor supply; Interindustry labor reallocation; PSM-DID method (search for similar items in EconPapers)
JEL-codes: J21 J23 Q52 Q58 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:82:y:2024:i:c:p:400-416

DOI: 10.1016/j.eap.2024.03.019

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