IDEAS home Printed from https://ideas.repec.org/a/wly/mgtdec/v44y2023i6p3026-3042.html

Government's green grip: Does industrial policy improve firm environmental performance?

Author

Listed:
  • Wenchao Bu
  • Siyu Ren

Abstract

National industrial policy is a common means for the government to regulate economic activities, and its effect on the environmental performance of enterprises is controversial. Based on the encouraged industries in China's “Five‐Year Plan,” the impact and micro‐influence mechanism of industrial policies on SO2 emission of enterprises are systematically analyzed. The results indicate that industrial policy can significantly reduce the SO2 emission in encouraged industries, and the conclusion is still valid after a series of robustness tests. This emission reduction effect is greater for the state‐owned firm, high R&D intensity firm, and high‐pollution firm. Compared with the firms in general encouraged industry, industrial policy has a greater impact on the SO2 emissions of firms in the key encouraged industries. The industrial policy promotes the resources transfer from high‐polluting companies to low‐polluting companies, reducing the market share of high‐pollution firms. Additionally, it reduces pollution emissions through front‐end pollution control (clean energy substitution and technological innovation). The conclusions of this study provide theoretical support for appropriate government policy intervention and have important practical significance for China's green sustainable development.

Suggested Citation

  • Wenchao Bu & Siyu Ren, 2023. "Government's green grip: Does industrial policy improve firm environmental performance?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(6), pages 3026-3042, September.
    • Handle: RePEc:wly:mgtdec:v:44:y:2023:i:6:p:3026-3042
    DOI: 10.1002/mde.3861
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/mde.3861
    Download Restriction: no
    File URL: https://libkey.io/10.1002/mde.3861?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
    ---><---

    References listed on IDEAS

    as
    1. Wu, Yiyun & Zhu, Xiwei & Groenewold, Nicolaas, 2019. "The determinants and effectiveness of industrial policy in china: A study based on Five-Year Plans," China Economic Review, Elsevier, vol. 53(C), pages 225-242.
    2. Sinha, Avik & Sengupta, Tuhin & Alvarado, Rafael, 2020. "Interplay between Technological Innovation and Environmental Quality: Formulating the SDG Policies for Next 11 Economies," MPRA Paper 104247, University Library of Munich, Germany, revised 2020.
    3. Eskeland, Gunnar S. & Harrison, Ann E., 2003. "Moving to greener pastures? Multinationals and the pollution haven hypothesis," Journal of Development Economics, Elsevier, vol. 70(1), pages 1-23, February.
    4. Rinat Zhanbayev & Wenchao Bu, 2023. "How does digital finance affect industrial transformation?," Journal of Information Economics, Anser Press, vol. 1(1), pages 18-30, January.
    5. Feng, Ling & Li, Zhiyuan & Swenson, Deborah L., 2016. "The connection between imported intermediate inputs and exports: Evidence from Chinese firms," Journal of International Economics, Elsevier, vol. 101(C), pages 86-101.
    6. Yuxin Meng & Lu Liu & Zhenlong Xu & Wenwen Gong & Guanpeng Yan, 2022. "Research on the Heterogeneity of Green Biased Technology Progress in Chinese Industries: Decomposition Index Analysis Based on the Slacks-based measure integrating," Journal of Economic Analysis, Anser Press, vol. 1(2), pages 17-34, December.
    7. Bruce A. Blonigen, 2016. "Industrial Policy and Downstream Export Performance," Economic Journal, Royal Economic Society, vol. 126(595), pages 1635-1659, September.
    8. Karl Aiginger & Dani Rodrik, 2020. "Rebirth of Industrial Policy and an Agenda for the Twenty-First Century," Journal of Industry, Competition and Trade, Springer, vol. 20(2), pages 189-207, June.
    9. Elie Cohen, 2006. "Theoretical Foundations of Industrial Policy," Post-Print hal-03569433, HAL.
    10. Ulrich Wagner & Christopher Timmins, 2009. "Agglomeration Effects in Foreign Direct Investment and the Pollution Haven Hypothesis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 43(2), pages 231-256, June.
    11. Schreifels, Jeremy J. & Fu, Yale & Wilson, Elizabeth J., 2012. "Sulfur dioxide control in China: policy evolution during the 10th and 11th Five-year Plans and lessons for the future," Energy Policy, Elsevier, vol. 48(C), pages 779-789.
    12. Philippe Aghion & Antoine Dechezleprêtre & David Hémous & Ralf Martin & John Van Reenen, 2016. "Carbon Taxes, Path Dependency, and Directed Technical Change: Evidence from the Auto Industry," Journal of Political Economy, University of Chicago Press, vol. 124(1), pages 1-51.
    13. Antonio Andreoni & Ha-Joon Chang, 2016. "Industrial policy and the future of manufacturing," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 43(4), pages 491-502, December.
    14. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
    15. Oliviero Carboni, 2011. "R&D subsidies and private R&D expenditures: evidence from Italian manufacturing data," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(4), pages 419-439.
    16. Xiaodong Yang & Weilong Wang & Haitao Wu & Jianlong Wang & Qiying Ran & Siyu Ren, 2022. "The impact of the new energy demonstration city policy on the green total factor productivity of resource-based cities: empirical evidence from a quasi-natural experiment in China," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 66(2), pages 293-326, November.
    17. Mingyue Du & Siyu Ren, 2023. "Does the digital economy promote industrial green transformation? Evidence from spatial Durbin model," Journal of Information Economics, Anser Press, vol. 1(1), pages 1-17, January.
    18. Wu, Haitao & Xue, Yan & Hao, Yu & Ren, Siyu, 2021. "How does internet development affect energy-saving and emission reduction? Evidence from China," Energy Economics, Elsevier, vol. 103(C).
    19. Spence, Michael, 1984. "Cost Reduction, Competition, and Industry Performance," Econometrica, Econometric Society, vol. 52(1), pages 101-121, January.
    20. Beason, Richard & Weinstein, David E, 1996. "Growth, Economies of Scale, and Targeting in Japan (1955-1990)," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 286-295, May.
    21. Zhu, Zhaohui & Tan, Yafei, 2022. "Can green industrial policy promote green innovation in heavily polluting enterprises? Evidence from China," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 59-75.
    22. Liu, Qing & Qiu, Larry D., 2016. "Intermediate input imports and innovations: Evidence from Chinese firms' patent filings," Journal of International Economics, Elsevier, vol. 103(C), pages 166-183.
    23. Zeng, Dao-Zhi & Zhao, Laixun, 2009. "Pollution havens and industrial agglomeration," Journal of Environmental Economics and Management, Elsevier, vol. 58(2), pages 141-153, September.
    24. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1993. "Long-term earnings losses of high-seniority displaced workers," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 17(Nov), pages 2-20.
    25. Albrizio, Silvia & Kozluk, Tomasz & Zipperer, Vera, 2017. "Environmental policies and productivity growth: Evidence across industries and firms," Journal of Environmental Economics and Management, Elsevier, vol. 81(C), pages 209-226.
    26. Mingyue Du & Siyu Ren, 2023. "Does the digital economy promote industrial green transformation? Evidence from spatial Durbin model," Journal of Information Economics, Anser Press, vol. 1(1), pages 1-17, January.
    27. Yuxin Meng & Lu Liu & Zhenlong Xu & Wenwen Gong & Guanpeng Yan, 2022. "Research on the Heterogeneity of Green Biased Technology Progress in Chinese Industries: Decomposition Index Analysis Based on the Slacks-based measure integrating," Journal of Economic Analysis, Anser Press, vol. 1(2), pages 17-34, December.
    28. Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2012. "The Environment and Directed Technical Change," American Economic Review, American Economic Association, vol. 102(1), pages 131-166, February.
    29. Rao, Nirupama, 2016. "Do tax credits stimulate R&D spending? The effect of the R&D tax credit in its first decade," Journal of Public Economics, Elsevier, vol. 140(C), pages 1-12.
    30. Dani Rodrik, 2008. "Normalizing Industrial Policy," World Bank Publications - Books, The World Bank Group, number 28009, April.
    31. Altenburg, Tilman, 2011. "Industrial policy in developing countries: overview and lessons from seven country cases," IDOS Discussion Papers 4/2011, German Institute of Development and Sustainability (IDOS).
    32. Yang, Haisheng & He, Jie & Chen, Shaoling, 2015. "The fragility of the Environmental Kuznets Curve: Revisiting the hypothesis with Chinese data via an “Extreme Bound Analysis”," Ecological Economics, Elsevier, vol. 109(C), pages 41-58.
    33. Ha‐Joon Chang & Antonio Andreoni, 2020. "Industrial Policy in the 21st Century," Development and Change, International Institute of Social Studies, vol. 51(2), pages 324-351, March.
    34. Rodrik, Dani, 1996. "Coordination failures and government policy: A model with applications to East Asia and Eastern Europe," Journal of International Economics, Elsevier, vol. 40(1-2), pages 1-22, February.
    35. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
    36. Philippe Aghion & Jing Cai & Mathias Dewatripont & Luosha Du & Ann Harrison & Patrick Legros, 2022. "Industrial Policy and Competition," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 15, pages 349-380, World Scientific Publishing Co. Pte. Ltd..
    37. Hosseini, Hossein Mirshojaeian & Kaneko, Shinji, 2013. "Can environmental quality spread through institutions?," Energy Policy, Elsevier, vol. 56(C), pages 312-321.
    38. Arik Levinson, 2009. "Technology, International Trade, and Pollution from US Manufacturing," American Economic Review, American Economic Association, vol. 99(5), pages 2177-2192, December.
    39. Arwin Pang & Daigee Shaw, 2011. "Optimal emission tax with pre-existing distortions," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 13(2), pages 79-88, June.
    40. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    41. Chen, Shimin & Sun, Zheng & Tang, Song & Wu, Donghui, 2011. "Government intervention and investment efficiency: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 17(2), pages 259-271, April.
    42. René Kemp & Babette Never, 2017. "Green transition, industrial policy, and economic development," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 33(1), pages 66-84.
    43. Alvarez-Herranz, Agustin & Balsalobre-Lorente, Daniel & Shahbaz, Muhammad & Cantos, José María, 2017. "Energy innovation and renewable energy consumption in the correction of air pollution levels," Energy Policy, Elsevier, vol. 105(C), pages 386-397.
    44. Siyu Ren & Yu Hao & Haitao Wu, 2022. "How Does Green Investment Affect Environmental Pollution? Evidence from China," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 81(1), pages 25-51, January.
    45. Tang, Erzi & Liu, Fengchao & Zhang, Jingjing & Yu, Jiao, 2014. "A model to analyze the environmental policy of resource reallocation and pollution control based on firms' heterogeneity," Resources Policy, Elsevier, vol. 39(C), pages 88-91.
    46. Andreoni, Antonio & Chang, Ha-Joon, 2019. "The political economy of industrial policy: Structural interdependencies, policy alignment and conflict management," Structural Change and Economic Dynamics, Elsevier, vol. 48(C), pages 136-150.
    47. Dani Rodrik, 2014. "Green industrial policy," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 30(3), pages 469-491.
    48. Elie Cohen, 2006. "Theoretical Foundations of Industrial Policy," Sciences Po Economics Publications (main) hal-03569433, HAL.
    49. Rinat Zhanbayev & Wenchao Bu, 2023. "How does digital finance affect industrial transformation?," Journal of Information Economics, Anser Press, vol. 1(1), pages 18-30, January.
    50. Cole, Matthew A. & Elliott, Robert J.R. & Shimamoto, Kenichi, 2005. "Industrial characteristics, environmental regulations and air pollution: an analysis of the UK manufacturing sector," Journal of Environmental Economics and Management, Elsevier, vol. 50(1), pages 121-143, July.
    51. Benjamin Powell, 2005. "State Development Planning: Did it Create an East Asian Miracle?," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 18(3), pages 305-323, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lianying Hong & Xujun Liu & Bei Liu & Kewei Cao & Qiu Xia, 2025. "The impact of reducing trade barriers on enterprises' pollution emissions: Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(4), pages 2190-2205, June.
    2. Tingting Bai & Yong Qi & Zihao Li & Dong Xu, 2025. "Will carbon emission trading policy improve the synergistic reduction efficiency of pollution and carbon? Evidence from 216 Chinese cities," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(4), pages 2120-2143, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yi Li & Lili Ding & Yongliang Yang, 2020. "Can the Introduction of an Environmental Target Assessment Policy Improve the TFP of Textile Enterprises? A Quasi-Natural Experiment Based on the Huai River Basin in China," Sustainability, MDPI, vol. 12(4), pages 1-19, February.
    2. Chung, Sunghoon, 2014. "Environmental regulation and foreign direct investment: Evidence from South Korea," Journal of Development Economics, Elsevier, vol. 108(C), pages 222-236.
    3. Kuang, Yunming & Lin, Boqiang, 2022. "Natural gas resource utilization, environmental policy and green economic development: Empirical evidence from China," Resources Policy, Elsevier, vol. 79(C).
    4. Huang, Xiaoqi & Liu, Wei & Zhang, Zhan & Zou, Xinyu & Li, Pujuan, 2023. "Quantity or quality: Environmental legislation and corporate green innovations," Ecological Economics, Elsevier, vol. 204(PB).
    5. Ioanna Kastelli & Lukasz Mamica & Keun Lee, 2023. "New perspectives and issues in industrial policy for sustainable development: from developmental and entrepreneurial to environmental state," Review of Evolutionary Political Economy, Springer, vol. 4(1), pages 1-25, April.
    6. Simone Tagliapietra & Reinhilde Veugelers, 2021. "Fostering the Industrial Component of the European Green Deal: Key Principles and Policy Options," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 56(6), pages 305-310, November.
    7. Chen, Ying & Wu, Wenjie & Yun, Yanwen, 2025. "The geography of pollution regulation and productivity," Journal of Environmental Economics and Management, Elsevier, vol. 131(C).
    8. Ke Ding & Helian Xu & Rongming Yang, 2021. "Taxation and Enterprise Innovation: Evidence from China’s Value-Added Tax Reform," Sustainability, MDPI, vol. 13(10), pages 1-20, May.
    9. Zhu, Zhaohui & Tan, Yafei, 2022. "Can green industrial policy promote green innovation in heavily polluting enterprises? Evidence from China," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 59-75.
    10. Wang, Xiaosong & Tian, Siyuan & Zhou, Yuding & Li, Le, 2025. "Import liberalization and pollution reduction: Firm-level evidence from Chinese manufacturing," Economic Analysis and Policy, Elsevier, vol. 86(C), pages 1-18.
    11. Ai, Hongshan & Zhou, Zhengqing & Li, Ke & Kang, Zhi-Yong, 2021. "Impacts of the desulfurization price subsidy policy on SO2 reduction: Evidence from China's coal-fired power plants," Energy Policy, Elsevier, vol. 157(C).
    12. Guo, Shu & Zhang, ZhongXiang, 2023. "Green credit policy and total factor productivity: Evidence from Chinese listed companies," Energy Economics, Elsevier, vol. 128(C).
    13. Zou, Ganna & Zhang, Shengbo & Gan, Xingqiong & Cheng, Hua, 2025. "How government green procurement incentivises corporate green innovation? Evidence from China," Economic Analysis and Policy, Elsevier, vol. 86(C), pages 1605-1626.
    14. Xie, Ronghui & Teo, Thompson S.H., 2022. "Green technology innovation, environmental externality, and the cleaner upgrading of industrial structure in China — Considering the moderating effect of environmental regulation," Technological Forecasting and Social Change, Elsevier, vol. 184(C).
    15. Shao, Yuchen & Xiao, Chengrui, 2019. "Corporate tax policy and heterogeneous firm innovation: Evidence from a developing country," Journal of Comparative Economics, Elsevier, vol. 47(2), pages 470-486.
    16. Tang, Maogang & Li, Xiuzhen & Zhang, Yun & Wu, Yingtao & Wu, Baijun, 2020. "From command-and-control to market-based environmental policies: Optimal transition timing and China’s heterogeneous environmental effectiveness," Economic Modelling, Elsevier, vol. 90(C), pages 1-10.
    17. Sunghoon Chung, 2012. "Environmental Regulation and the Pattern of Outward FDI: An Empirical Assessment of the Pollution Haven Hypothesis," Departmental Working Papers 1203, Southern Methodist University, Department of Economics.
    18. Tonghui Lian & Tingyu Ma & Jie Cao & You Wu, 2016. "The effects of environmental regulation on the industrial location of China’s manufacturing," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 80(2), pages 1381-1403, January.
    19. Cheng, Qi & Yang, Jun, 2024. "Is green place-based policy effective in mitigating pollution? Firm-level evidence from China," Economic Analysis and Policy, Elsevier, vol. 83(C), pages 530-547.
    20. Wu, Qingyang & Wang, Yaqi & Shen, Guangjun, 2024. "The green bonus of tax incentives: Evidence from China," Journal of Economic Behavior & Organization, Elsevier, vol. 227(C).

    More about this item

    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:wly:mgtdec:v:44:y:2023:i:6:p:3026-3042. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/7976 .

    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.