The impacts of heterogeneous environmental regulations on green economic efficiency from the perspective of urbanization: a dynamic threshold analysis

Urbanization is a social and complex phenomenon. In recent years, rapid urbanization has not only accelerated economic development in China, but also has raised ecological concerns including biodiversity reduction, habitat degradation and congestion effect, which poses significant challenges to green economic efficiency. Although China proposed its first ecological civilization strategy in 2007, as stressed in the thirteenth Five-Year Plan (2016–2020), resource shortages and environmental degradation caused by urbanization processes have created a bottleneck effect, thus restricting China’s green economic efficiency. Therefore, this study aims to determine how heterogeneous environmental regulations affect China’s green economic efficiency from the perspective of urbanization over the period 2003–2017. The results of static and dynamic threshold regressions show that command-and-control and voluntary environmental regulations promote green economic efficiency at different urbanization levels. In static threshold model, market-based environmental regulation stimulates green economic efficiency when urbanization is below the first threshold and above the second threshold, while it constrains green economic efficiency when urbanization is between the single and the double thresholds. In dynamic threshold model, market-based environmental regulation improves green economic efficiency when urbanization is below the threshold and impedes it when urbanization exceeds the threshold. Finally, several important policy recommendations are documented.