Labor market impact of China’s cross-regional environmental regulation on pollution-intensive firms

Caiqi Bu, Daqian Shi and Kaixia Zhang

Journal of Environmental Planning and Management, 2024, vol. 67, issue 12, 3026-3050

Abstract: The relationship between environmental regulation and labor demand has been mixed. Few research studies have considered the impact of cross-regional environmental regulations on the labor market, even though this is notable. We adopted a geographic regression discontinuity (RD) approach to investigate the labor market impact of the cross-regional environmental regulation “2 + 26” Cities Special Emission Limit Program for Air Pollutants. We found that the policy significantly boosts the labor demand of polluting firms rather than a simple inter-industry transfer, mainly through increasing investment in fixed assets and cost offset mechanisms. Further analysis of the structure of labor demand shows that the increasing workforce is primarily low-quality labor accompanied by wage loss. The government should recognize the risks of welfare loss from low-quality work due to environmental regulation and direct polluting firms to innovate rather than reduce costs by increasing demand for low-quality labor. This facilitates a better understanding of the labor market response to environmental policy from the perspective of cross-regional environmental regulation.

Date: 2024
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DOI: 10.1080/09640568.2023.2216871

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