Environmental Regulation, Entrepreneurship and Economic Growth: An Empirical Study Based on Threshold Effect Test in China

Ma Weidong, Wu Cheng Chung and Tang Deshan

Prague Economic Papers, 2021, vol. 2021, issue 3, 358-377

Abstract: Based on panel data from 2000 to 2017 on 30 provinces in China, we analyse the threshold effect of environmental regulation on the quality improvement of economic growth in Eastern, Central, and Western China using a threshold regression model with entrepre-neurship as the threshold variable. The conclusions are as follows: (1) With a low entre-preneurship index, environmental regulation inhibits the quality of regional economic growth. When the entrepreneurship index is at a middle level, the effect changes from an original adverse impact to a favourable impact, which is very significant in Eastern and Western China, but not significant in Central China. When entrepreneurship is highly active, environmental regulation is beneficial to economic growth quality in all regions, and environmental regulation can bring into play the function of "reversed mechanism" to promote economic growth quality. (2) The differences in entrepreneurship level in the three regions lead to regional heterogeneity of the threshold effect between environmental regulation and economic growth quality. Eastern China realizes a double dividend of environmental improvement and economic growth. The entrepreneurial activity in the Central and Western regions is a little far away from their threshold values, at which environmental regulation can produce a significant incentive effect. In conclusion, we put forward three suggestions to improve the entrepreneurial activity and fully realize the double dividend of environmental improvement and economic growth.

Keywords: Environmental regulation; entrepreneurship total factor productivity; threshold effect test (search for similar items in EconPapers)
JEL-codes: O47 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.18267/j.pep.768

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