IDEAS home Printed from https://ideas.repec.org/a/eee/pubeco/v256y2026ics0047272726000320.html

Greening to grow: Evidence from environmental regulation and industrial firm productivity in China

Author

Listed:
  • Lu, Yangsiyu
  • Pless, Jacquelyn

Abstract

We study the impact of a major air pollution regulation on industrial firm productivity in China and show that accounting for heterogeneity in regulatory exposure is crucial for understanding the economic effects of environmental regulation. Exploiting variation generated by the regulation’s geographic design and industry pollution intensity, we find that total factor productivity increased by about 5% for regulated firms in less pollution-intensive industries relative to unregulated firms. In more pollution-intensive industries, average productivity declined relative to regulated cleaner industries but remained stable relative to unregulated firms. We show that productivity gains were achieved through a combination of market selection, reallocation, and within-firm industrial upgrading, but the relative importance of these channels varies with pollution intensity. Firms in “cleaner” industries upgraded broadly and expanded, while firms in dirtier industries invested in capital upgrades and improved input efficiency without expansion. Creative destruction dynamics are concentrated among private firms rather than state-owned enterprises, highlighting the role of political institutions and incentives in shaping the productivity consequences of environmental regulation.

Suggested Citation

  • Lu, Yangsiyu & Pless, Jacquelyn, 2026. "Greening to grow: Evidence from environmental regulation and industrial firm productivity in China," Journal of Public Economics, Elsevier, vol. 256(C).
    • Handle: RePEc:eee:pubeco:v:256:y:2026:i:c:s0047272726000320
    DOI: 10.1016/j.jpubeco.2026.105596
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0047272726000320
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jpubeco.2026.105596?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

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

    Statistics

    Access and download statistics

    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:pubeco:v:256:y:2026:i:c:s0047272726000320. 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.elsevier.com/locate/inca/505578 .

    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.