The Effects of Environmental Regulation on Industrial Pollution and Industrial Activities: Evidence from China

39 Pages Posted: 18 Mar 2014 Last revised: 6 May 2016

See all articles by Liangliang Jiang

Liangliang Jiang

Hong Kong Polytechnic University

Sen Ma

University of Illinois at Urbana-Champaign, Department of Economics

Yi Zhu

The Hong Kong University of Science and Technology

Date Written: December 18, 2013

Abstract

Despite the increasing adoption of environmental regulations in emerging economies, their socioeconomic impact has not been fully explored. This study evaluates the effects of a sulfur dioxide (SO2) control policy in China on industrial emission and production activities. The “Two Control Zone” policy, which was introduced in 1998, urges cities designated as regulated zones to reduce SO2 emission by a certain target level. This enables us to identify the direct and spillover policy effects by exploiting quasi-experimental feature of the policy treatment. We estimate that the policy has reduced industrial SO2 emissions by about 13 percent, which is in fact an aggregate estimate combining a direct effect (-21 percent) on treated cities and an indirect spillover effect (8 percent) running from treated cities to nearby cities. We also find that the positive effect of the policy on production scale of heavy pollution industries is mostly due to spillover impact of the treatment in neighbor cities. There is some suggestive evidence that the spillover effects are more likely to be realized through migration of polluting plants.

Keywords: air pollution, two-regulated zones

JEL Classification: Q58, Q53, Q52

Suggested Citation

Jiang, Liangliang and Ma, Sen and Zhu, Yi, The Effects of Environmental Regulation on Industrial Pollution and Industrial Activities: Evidence from China (December 18, 2013). Available at SSRN: https://ssrn.com/abstract=2410731 or http://dx.doi.org/10.2139/ssrn.2410731

Liangliang Jiang (Contact Author)

Hong Kong Polytechnic University ( email )

11 Yuk Choi Rd
Hung Hom
Hong Kong

Sen Ma

University of Illinois at Urbana-Champaign, Department of Economics ( email )

214 David Kinley Hall
1407 W. GREGORY
Urbana, IL Illinois 61801
United States

Yi Zhu

The Hong Kong University of Science and Technology ( email )

Social Science Division
HKUST
Clear Water Bay, Kowloon
Hong Kong
(852) 2358-7837 (Phone)
(852) 2335-0014 (Fax)

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