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Environmental regulations and competitiveness: evidence based on Chinese firm data

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  • Ankai Xu

Abstract

This paper provides empirical evidence in support of the Porter hypothesis that tighter environmental regulations can increase productivity under certain circumstances. It builds on a theoretical model in which environmental regulations induce firms to adopt more efficient technologies. Using Chinese firm-level data covering a ten-year period, the empirical study examines the effects of two specific policy instruments - the pollution levy and regulatory standards - on firm productivity. It finds a bell-shaped relationship between pollution levies and the total factor productivity of firms, indicating that an increase in the pollution levy rate can be associated with higher productivity. In addition, the study investigates the effect of pollution emission standards on firm productivity and identifes an initial negative effect which diminishes after a period of two to three years.

Suggested Citation

  • Ankai Xu, 2016. "Environmental regulations and competitiveness: evidence based on Chinese firm data," CIES Research Paper series 47-2016, Centre for International Environmental Studies, The Graduate Institute.
  • Handle: RePEc:gii:ciesrp:cies_rp_47
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    File URL: http://repec.graduateinstitute.ch/pdfs/ciesrp/CIES_RP_47.pdf
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    References listed on IDEAS

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    6. Nick Johnstone & Ivan Haščič & David Popp, 2010. "Renewable Energy Policies and Technological Innovation: Evidence Based on Patent Counts," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 45(1), pages 133-155, January.
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    More about this item

    Keywords

    Environmental regulations; Innovation; Productivity; Porter hypothesis; China.;

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • 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

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