The Impact of Environmental Regulation on the Location of Pollution-Intensive Industries in China under Agglomeration Effect

Yinhao Wu, Shumin Yu and Xiangdong Duan
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Yinhao Wu: Institute of Economics and Management, Henan Agricultural University, Zhengzhou 450046, China
Shumin Yu: Institute of Economics and Management, Henan Agricultural University, Zhengzhou 450046, China
Xiangdong Duan: Archival Research Centre, Henan Agricultural University, Zhengzhou 450001, China

IJERPH, 2021, vol. 18, issue 8, 1-14

Abstract: Pollution-intensive industries (PIIs) have both scale effect and environmental sensitivity. Therefore, this paper studies how environmental regulation (ER) affects the location dynamics of PIIs under the agglomeration effect. Our results show that, ER can increase the production costs of pollution-intensive firms (PIFs) by internalizing the negative impact of pollutant discharge in a region, and thus, directly reduces the region’s attractiveness to PIFs. Meanwhile, ER can indirectly reduce the attractiveness of a region to PIFs by reducing the externality of the regional agglomeration effect. Moreover, these influences are regulated by the level of local economic development. Based on the moderated mediating effect model, we find evidence from the site selection activities of newly built chemical firms in cities across China. The empirical test shows that compared with 2014, the proportion of the direct effect of ER to the total effects significantly decreased in 2018, while the proportion of indirect effects under the agglomeration effect increased significantly. Our findings provide reference for the government to design effective environmental policies to guide the location choice of new PIFs.

Keywords: environmental regulation (ER); agglomeration effect; economic development level; location of pollution-intensive industries (PIIs); influence mechanisms; moderated mediation model (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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