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Environmental regulation and compensation distribution within enterprises:Evidence from China

Author

Listed:
  • Lin, Feiteng
  • Chen, Wenqiang
  • Qian, Chaosu
  • Lv, Meimeng

Abstract

Investigating the effects of environmental regulation on income distribution is a crucial extension of assessing the economic impacts of environmental policies. However, the current literature lacks a thorough discussion on how environmental regulation affects income distribution, particularly concerning the pay gap within firms. In this paper, we employ the implementation of China's Key Pollutant-Discharging Units List policy as a quasi-natural experiment to investigate the impact of environmental regulation on the pay gap within firms. Our findings indicate that environmental regulation significantly exacerbates the pay gap within firms, as evidenced by increased management compensation and reduced compensation for ordinary employees. Mechanism analysis suggests that governance pressure and financial pressure are potential pathways through which this effect occurs. Heterogeneity tests reveal that the widening effect of environmental regulation on the pay gap within firms is more pronounced in non-state-controlled enterprises and firms subject to stringent local regulatory enforcement.

Suggested Citation

  • Lin, Feiteng & Chen, Wenqiang & Qian, Chaosu & Lv, Meimeng, 2026. "Environmental regulation and compensation distribution within enterprises:Evidence from China," Economic Modelling, Elsevier, vol. 156(C).
    • Handle: RePEc:eee:ecmode:v:156:y:2026:i:c:s0264999326000039
    DOI: 10.1016/j.econmod.2026.107474
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    Keywords

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    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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