Carbon emission regulation, input-output networks, and firm dynamics: The case of low-carbon zone pilot in China

54 Pages Posted: 10 Jan 2022

See all articles by Xiangyu Shi

Xiangyu Shi

Yale University, Department of Economics, Students

Chang Wang

Fudan University

Date Written: January 9, 2022

Abstract

We provide the first theoretical and empirical study on how the carbon emission regulation affects firm dynamics, including entry, exit, and innovation. Using a difference-in-difference-in-differences empirical strategy, we find that in low-carbon zone pilot cities, in carbon-intensive sectors, and after the policy is implemented, there are significantly less entry and exit, but more patent applications related to energy efficiency. The effects of the regulation diffuse in the input-output networks. In the downstream sectors of the carbon-intensive sectors, there are more entry, exit, and environment-related patent applications; in the upstream sectors, there are less entry, exit, and patent applications. These facts can be rationalized by a firm-dynamics model with input-output linkages.

Keywords: carbon policy, firm dynamics, innovation, input-output network

JEL Classification: C15, D21, D22, E23, Q56

Suggested Citation

Shi, Xiangyu and Wang, Chang, Carbon emission regulation, input-output networks, and firm dynamics: The case of low-carbon zone pilot in China (January 9, 2022). Available at SSRN: https://ssrn.com/abstract=4004340 or http://dx.doi.org/10.2139/ssrn.4004340

Xiangyu Shi (Contact Author)

Yale University, Department of Economics, Students ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

Chang Wang

Fudan University

600 GuoQuan Road
Shanghai, 200433
China

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

Paper statistics

Downloads
246
Abstract Views
967
rank
171,954
PlumX Metrics