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The Impact of Environmental Regulation on Firm Export: Evidence from China’s Ecological Protection Red Line Policy?

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  • Huayun Zhai

    (School of Management, South-Central University for Nationalities, Wuhan 430074, China)

  • Danlan Liu

    (School of Management, South-Central University for Nationalities, Wuhan 430074, China)

  • Kam C. Chan

    (Gordon Ford College of Business, Western Kentucky University, Bowling Green, KY 42101, USA)

Abstract

China conducted a comprehensive overhaul of its environmental regulation as of April 2014. The regulation, which calls for a holistic approach to protect the environment, is also called the “Ecological Protection Red Line” (Red Line). It sets comprehensive standards for pollutants and mandates provinces to implement the regulations. The Porter and pollution haven hypotheses were tested for the impact of the Red Line on firm exports using a sample of Chinese A-share firms from 2011 to 2017. Our findings are consistent with the Porter hypothesis. The implementation of the Red Line has a positive impact on a firm’s exports. The findings are robust to alternative metrics of exports and different sub-samples. A firm’s innovation activities (in terms of research and development investments) and production efficiency were found to be the transmission channels, corroborating the underlying logic of the Porter hypothesis. Policy implications are discussed.

Suggested Citation

  • Huayun Zhai & Danlan Liu & Kam C. Chan, 2019. "The Impact of Environmental Regulation on Firm Export: Evidence from China’s Ecological Protection Red Line Policy?," Sustainability, MDPI, vol. 11(19), pages 1-13, October.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:19:p:5493-:d:273423
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    References listed on IDEAS

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    Cited by:

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    2. Cihat Koksal & Guldenur Cetin, 2021. "The International Trade Analysis of Turkey’s Polluting Industries," Journal of Economic Policy Researches, Istanbul University, Faculty of Economics, vol. 8(2), pages 257-275, July.
    3. Xu, Yuan & Wu, Yanrui & Shi, Yongli, 2021. "Emission reduction and foreign direct investment nexus in China," Journal of Asian Economics, Elsevier, vol. 74(C).
    4. Jianhua Tan & Kam C. Chan & Yining Chen, 2022. "The impact of air pollution on the cost of debt financing: Evidence from the bond market," Business Strategy and the Environment, Wiley Blackwell, vol. 31(1), pages 464-482, January.
    5. Xuehui Zhang & Zhidong Tan & Bao-Guang Chang & Kam C. Chan, 2019. "Is a Regional Coordination Approach to Air Pollution Management Helpful? Evidence from China," Sustainability, MDPI, vol. 12(1), pages 1-17, December.
    6. Huang, Zhi-xiong & Yang, Xiandong, 2021. "Carbon emissions and firm innovation," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 503-513.

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