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

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.

Keywords:

• environmental regulation
• labor demand
• geographic regression discontinuity
• 2 + 26 cities
• cross-regional

Jel:

• J21
• J23
• Q51
• Q58

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 News From: https://siepr.stanford.edu/research/publications/what-killing-us-coal-industry.

2 The “2 + 26” cities are centered in Beijing and Tianjin, including Shijiazhuang, Tangshan, Handan, Xingtai, Baoding, Cangzhou, Langfang and Hengshui in Hebei Province, Taiyuan, Yangquan, Changzhi and Jincheng in Shanxi Province, Jinan, Zibo, Jining, Dezhou, Liaocheng, Binzhou and Heze in Shandong Province, and Zhengzhou, Kaifeng, Anyang, Henan Province, Hebi, Xinxiang, Jiaozuo and Puyang City.

3 Before using DID, to ensure the validity of the method, we need to perform a parallel trend test as shown in Appendix 2. The results show that the parallel trend hypothesis holds.

4 Due to the continuous policy cycle after 2013, when President Xi took office, we selected data from listed firms from 2013–2020 and matched with corporate recruitment data using firm name, latitude, longitude and address.

Additional information

Funding

The authors thank the editors and reviewers for their helpful comments. This research was financially supported by the National Natural Science Foundation of China (Grant No. 72203180) and the youth project of the science and technology research program of Chongqing Education Commission of China (Grant No. KJQN202200304).