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The effects of two types of environmental regulations on economic efficiency: An analysis of Chinese industries

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  • Fei-Fei Ye
  • Ying-Ming Wang

Abstract

Improvements to industrial economic efficiency are important in coordinating China’s economic development and its environmental protections; furthermore, an effective environmental regulation system is a crucial driver of both industrial economic efficiency and technological innovation. Using panel data pertaining to China’s 12 characteristic industries over the 2008–2015 period, this study divides environmental regulations into two types – namely, cost-oriented environmental regulations (ER1) and investment-oriented environmental regulations (ER2). This study employs a slacks-based method to calculate the economic efficiency of different groups of industries, and it applies a regression model to test the effects of these two types of environmental regulations on economic efficiency and technological innovation among China’s 12 key industries. Our research results offer three distinct findings. (1) These two types of environmental regulations have opposite effects on industrial efficiency and technological innovation: ER1 have significant and positive effects on economic efficiency and technological innovation, but ER2 have negative effects on them. (2) The results with respect to various groups of industries differ widely, with low-efficiency industries sustaining a more positive influence from environmental regulations and technological innovation than high-efficiency ones. (3) Technological innovation effectively promotes the economic efficiency of industries and tends to have a more significant impact on relatively low-efficiency industries. These findings indicate that the effects of different types of environmental regulations differ across industries. Finally, to optimize and adjust these environmental regulation tools, this study makes policy recommendations for various industries.

Suggested Citation

  • Fei-Fei Ye & Ying-Ming Wang, 2019. "The effects of two types of environmental regulations on economic efficiency: An analysis of Chinese industries," Energy & Environment, , vol. 30(5), pages 898-929, August.
    • Handle: RePEc:sae:engenv:v:30:y:2019:i:5:p:898-929
    DOI: 10.1177/0958305X18813690
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    2. Muyao Li & Jinsong Zhang & Ramakrishnan Ramanathan & Ruiqian Li, 2020. "Opening the Black Box: The Impacts of Environmental Regulations on Technological Innovation," IJERPH, MDPI, vol. 17(12), pages 1-18, June.
    3. Melike E Bildirici, 2021. "Terrorism, environmental pollution, foreign direct investment (FDI), energy consumption, and economic growth: Evidences from China, India, Israel, and Turkey," Energy & Environment, , vol. 32(1), pages 75-95, February.

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