Environmental Regulation on Employment: Creation or Destruction?—Measurement and Calculation Based on Two-Tier Stochastic Frontier Model

This research breaks away from the existing literature that focuses only on the relationship between environmental regulations and employment size and employment structure, and focuses on the employment creation effect, destruction effect and the net effect of environmental regulations on employment. Accordingly, employing a two-tier stochastic frontier model, this research will answer whether the bilateral effects of environmental regulation on employment exist, which is larger or smaller, the net effect using provincial panel data in China from 2011 to 2020. Research results show that the creation effect makes employment higher than the frontier level by 3.18%, while the destruction effect makes employment lower than the frontier level by 4.58%, and finally the destruction effect dominates with the two-tier effects making employment lower than the frontier level by 1.40%. Furthermore, it was found that the lower the level of environmental regulation implementation, the greater its destruction effect. Moreover, from different human capital perspectives, environmental regulations have the least damaging effect on the low-skilled group, followed by the high-skilled group, and the most significant effect on the medium-skilled group. The destruction effect exhibits regional heterogeneity, sequentially weakening from the east to the central and western regions. The findings of this study hold particular significance for governmental entities in determining the stringency of environmental regulatory measures. It effectively promotes the government’s enforcement of environmental regulation policies, and has significant implications for achieving the dual advantages of “environmental protection†and “full employment†in society.