Going Green in China: Firms’ Responses to Stricter Environmental Regulations

44 Pages Posted: 9 Dec 2019 Last revised: 9 Jul 2021

See all articles by Haichao Fan

Haichao Fan

Fudan University - School of Economics

Joshua Graff Zivin

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS); National Bureau of Economic Research (NBER)

Zonglai Kou

Fudan University

Xueyue Liu

Fudan University

Huanhuan Wang

East China Normal University (ECNU)

Date Written: December 2019

Abstract

This paper examines the effect of stringent environmental regulations on firms' environmental practices, economic performance, and environmental innovation. Reducing COD levels by 10% relative to 2005 levels is an aim of the Chinese 11th Five-Year Plan. Using a difference-in-differences framework based on a comprehensive firm-level dataset, we find that more stringent environmental regulations faced by firms are positively associated with a greater probability of reducing COD emissions; also, there exists an evident heterogeneous effect across industries with different pollution intensities. Stricter environmental regulations also account for the sharp decline in firms' profits, capital, and labor. After executing a complete chain of tests of the underlying mechanisms, we find that firms rely more on recycling and abatement investment than on innovations when meeting environmental requirements.

Suggested Citation

Fan, Haichao and Graff Zivin, Joshua and Kou, Zonglai and Liu, Xueyue and Wang, Huanhuan, Going Green in China: Firms’ Responses to Stricter Environmental Regulations (December 2019). NBER Working Paper No. w26540, Available at SSRN: https://ssrn.com/abstract=3500658

Haichao Fan (Contact Author)

Fudan University - School of Economics ( email )

600 GuoQuan Road
Shanghai, 200433
China

Joshua Graff Zivin

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS) ( email )

9500 Gilman Drive
La Jolla, CA 92093-0519
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Zonglai Kou

Fudan University ( email )

Beijing West District Baiyun Load 10th
Shanghai, 100045
China

Xueyue Liu

Fudan University ( email )

Beijing West District Baiyun Load 10th
Shanghai, 100045
China

Huanhuan Wang

East China Normal University (ECNU) ( email )

North Zhongshan Road Campus
3663 N. Zhongshan Rd.
Shanghai, 200062
China

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
14
Abstract Views
281
PlumX Metrics