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Toward low-carbon transition: Does carbon regulation matter for spatial development inequality?

Author

Listed:
  • Xiaoke Zhu

    (University of Göttingen)

  • Qiyun Deng

    (Sichuan University)

  • Shuo Zhang

    (University of New South Wales)

Abstract

This study aims to investigate how carbon regulation shapes economic inequality in developing countries. Based on high-resolution satellite data, we exploit the shock of the Chinese central government gradually phasing in the emission trading scheme (ETS) across regions to conduct a staggered difference-in-difference estimation. We present strong evidence of the ETS’s effectiveness in mitigating spatial development inequality. Our findings remain robust to different identification strategies and alternative measures. Plausible mechanisms driving our results may involve the reduction in the innovation gap and the improvement in factor allocation. Notably, cities with higher levels of marketization, carbon intensity, and digital finance development are more substantially impacted by the ETS. Furthermore, accounting for spatial interactions, the ETS implemented in pilot cities significantly alleviates spatial development inequality in neighboring non-pilot regions.

Suggested Citation

  • Xiaoke Zhu & Qiyun Deng & Shuo Zhang, 2024. "Toward low-carbon transition: Does carbon regulation matter for spatial development inequality?," Economic Change and Restructuring, Springer, vol. 57(6), pages 1-29, December.
    • Handle: RePEc:kap:ecopln:v:57:y:2024:i:6:d:10.1007_s10644-024-09829-0
    DOI: 10.1007/s10644-024-09829-0
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    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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