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Does environmental regulation affect labor investment Efficiency?Evidence from a quasi-natural experiment in China

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  • Chen, Chunhua
  • Jiang, Dequan
  • Lan, Meng
  • Li, Weiping
  • Ye, Ling

Abstract

Applying the sulfur dioxide (SO2) emission trading system (ETS) as an exogenous shock to environmental regulation, we conduct a quasi-natural experiment to investigate the impact of environmental regulation on labor investment efficiency. Our results indicate that SO2 ETS impedes a firm's labor investment efficiency. This effect is driven by the firm's over-firing or under-hiring behaviors, not by the lower total investment efficiency. Moreover, we show that the impact of SO2 ETS is more pronounced in firms with higher agency costs and high labor adjusting costs. Besides, the low labor investment efficiency is not substantial for state-owned enterprises.

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  • Chen, Chunhua & Jiang, Dequan & Lan, Meng & Li, Weiping & Ye, Ling, 2022. "Does environmental regulation affect labor investment Efficiency?Evidence from a quasi-natural experiment in China," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 82-95.
    • Handle: RePEc:eee:reveco:v:80:y:2022:i:c:p:82-95
    DOI: 10.1016/j.iref.2022.02.018
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    Cited by:

    1. Gao, Yihong & Gao, Jiayan, 2023. "Low-carbon transformation and corporate cash holdings," Finance Research Letters, Elsevier, vol. 54(C).
    2. Chao Wu & Yu Hua, 2023. "Does Environmental Regulation Have an Employment Dividend? Evidence from China," Sustainability, MDPI, vol. 15(7), pages 1-20, April.
    3. Yan, Bin & Wang, Feng & Chen, Tian & Liu, Siyu & Bai, Xiaoxuan, 2023. "Digital finance, environmental regulation and emission reduction in manufacturing industry: New evidence incorporating dynamic spatial-temporal correlation and competition," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 750-763.

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    More about this item

    Keywords

    Environmental regulation; Labor investment efficiency; Emission trading system; Natural experiment;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population
    • P24 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation

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