Labour supply and pollution in China

Abstract

In the context of sharply declining labour supply in China, this article analyses the relationship between pollution and labour supply theoretically. In addition, using Chinese provincial data, we find that pollution impacts negatively on labour supply and that this is aggravated by rising labour income.

Keywords:

• pollution
• labour supply
• panel error correction model

JEL Classification:

• J22
• O11

Acknowledgements

This Research was supported by National Natural Science of China (Grant No. 71133007) and New Century Excellent University Talents of Ministry of Education of China (Grant No. NCET-10-0883). The views expressed in this article are those of the authors and do not necessarily reflect those of the European Central Bank.

Notes

¹ This describes the point at which a previously unlimited supply of labour is fully absorbed when the economy reaches a certain stage of economic development (see Cai, 2008).

² Industry Structure is measured by the ratio of the value added of the second industry and the thirtieth industry to GDP.