The impact of environmental regulations on employment: Quasi-experimental evidence from regulated and unregulated industries in China

Zheng Li and Bohan Jin

Applied Economics, 2024, vol. 56, issue 40, 4827-4848

Abstract: Existing studies on the employment effect of environmental regulations focus exclusively on regulated sectors, but labour demand in unregulated sectors can also be affected in a general equilibrium framework. Using the designation of Key Cities for Air Pollution Control in 2001 in China as a quasi-experiment, we employ PSM and DDD methods and find that the policy lowers employment in emission-intensive polluting firms, but it also increases employment in labour-intensive non-polluting firms, providing evidence of relocation of workers from regulated to unregulated industries. Evidence from city-level aggregate data suggests that the overall employment effect is minimal, and no evidence is found to suggest that workers move from the manufacturing sector to the services sector. The results are robust to a host of robustness checks. The finding implies that the job-killing effect of environmental regulations is over-stated, and non-polluting industries are not suitable comparison units in previous DID literature.

Date: 2024
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DOI: 10.1080/00036846.2023.2216442

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