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The effect of environmental regulation and skill premium on the inflow of FDI:Evidence from Chinese industrial sectors

Chao Wang and Yue-Jun Zhang

International Review of Economics & Finance, 2022, vol. 81, issue C, 227-242

Abstract: Whether environmental regulation helps to promote the inflow of FDI in China's industry and whether the effect of environmental regulation on FDI through the skill premium varies across industrial sectors remains unclear. Therefore, this article develops the mediating effect model and the threshold effect model to estimate the impact mechanism of environmental regulation on FDI in Chinese industrial sectors. The results indicate that: First, within the sample period, environmental regulation has significantly hindered the increase in the skill premium in Chinese industrial sectors. Second, the enhancement of environmental regulation has significantly boosted the inflow of FDI in industrial sectors, especially in the strategic emerging industries. Finally, skill premium has a single threshold effect, and when it is less than or equal to the threshold, its increase helps environmental regulation promote the inflow of FDI, but when it exceeds the threshold, environmental regulation will not significantly affect the inflow of FDI.

Keywords: Environmental regulation; FDI; Industrial sectors; Skill premium; Mediating effect; Threshold effect (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.iref.2022.05.011

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