The Mechanisms and Empirical Analysis of the Impact of Environmental Regulations on Employment Levels in Specific Industries in China

Lan Lu, Weiran Huang () and Kexin Fang
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Lan Lu: School of Economics, Qingdao University, Qingdao 266071, China
Weiran Huang: School of Economics, Qingdao University, Qingdao 266071, China
Kexin Fang: School of Economics, Qingdao University, Qingdao 266071, China

Sustainability, 2025, vol. 17, issue 7, 1-27

Abstract: As environmental regulations in China have become more stringent, balancing these regulations with employment growth represents a major concern for policymakers and researchers striving for sustainable economic development. Although several studies have investigated the influence of environmental regulations on labor demand, most focus on corporate or regional levels, with limited exploration of industry-specific dynamics. Given the external and interconnected nature of environmental challenges, regulatory policies not only significantly impact the targeted industry but also generate spillover effects across interrelated sectors, thereby shaping broader sustainability transitions. This paper examines the mechanisms through which environmental regulations affect industry employment, incorporating the role of industrial linkages in sustainable labor market adjustments. Using panel data from 34 Chinese industries (2009–2018), this study empirically analyzes how stringent regulations influence employment dynamics, considering variations in technology and pollution intensity. The findings reveal a U-shaped relationship between environmental regulations and employment, accompanied by downward network spillover effects. Furthermore, threshold regressions demonstrate industry-specific effects, wherein clean and high-tech industries experience minimal short-term disruptions but benefit from regulatory intensity in the long run. In contrast, low-tech and pollution-intensive industries face notable direct and spillover effects, with low-tech sectors exhibiting job creation effects and pollution-intensive sectors experiencing displacement effects. To achieve sustainable employment structures while maintaining environmental integrity, policymakers must recognize inter-industry linkages and implement targeted policies that support sectoral transitions toward green and high-tech advancements. Encouraging upstream improvements to enhance downstream sustainability will be essential for balancing regulatory enforcement with long-term employment stability.

Keywords: environmental regulations; industry employment levels; industrial associations; threshold regression; sustainable labor market (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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