IDEAS home Printed from https://ideas.repec.org/a/eee/ecanpo/v86y2025icp713-730.html
   My bibliography  Save this article

The effect of the environmental protection tax on corporate labor demand: Evidence from China

Author

Listed:
  • Yin, Qiuyue
  • Meng, Chenyu
  • Dong, Zhanfeng
  • Li, Bin

Abstract

The environmental protection tax (EPT) is the first independent green tax in China's history aimed at environmental protection. However, limited research examined its potential impact on corporate labor demand. This study tries to investigate the effect of the EPT on corporate labor demand by taking the implementation of the EPT in 2018 as a quasi-natural experiment. This study applies the difference-in-differences (DID) model and the micro-data of industrial enterprises listed on the Shenzhen and Shanghai A-share markets from 2013 to 2022. The result suggests that the EPT could significantly increase corporate labor demand, which is verified by a range of robustness checks. The result of the mechanism analysis indicates that the EPT could increase corporate labor demand by the output effect and the substitution effect, which means the EPT increases corporate labor demand by motivating firms to expand production scale and increase environmental investment. The heterogeneity analysis indicates that the EPT's impact is significant only in large-scale enterprises and state-owned enterprises. Moreover, among laborers with different skill levels, the EPT only exerts a significant influence on corporate demand for high-skilled labor. This study bears important policy implications for keeping the balance between environmental protection and employment stability.

Suggested Citation

  • Yin, Qiuyue & Meng, Chenyu & Dong, Zhanfeng & Li, Bin, 2025. "The effect of the environmental protection tax on corporate labor demand: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 86(C), pages 713-730.
    • Handle: RePEc:eee:ecanpo:v:86:y:2025:i:c:p:713-730
    DOI: 10.1016/j.eap.2025.04.010
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0313592625001389
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eap.2025.04.010?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecanpo:v:86:y:2025:i:c:p:713-730. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/economic-analysis-and-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.