The Influence Of Environmental Regulation On Manufacturing Productivity

Manufacturing,as the cornerstone industry of the national economy and the engine of industrialization,plays an indispensable leadership role in China’s economic progress.However,with the awakening of environmental protection consciousness,the high energy consumption and high pollution emission of the manufacturing industry have become increasingly prominent,which has become a constraint factor limiting the high-quality development of the manufacturing industry.The report of the 20th Party Congress proposed to "promote green development and harmonious coexistence between human beings and nature",and promote environmental management from the height of harmonious coexistence between human beings and nature,while the increasingly strict environmental management also brings resistance to economic development.In particular,as China’s economy enters the new normal,the mode of economic development is changing from relying on scale expansion and factor-driven development to efficiency improvement and innovation-driven development.This implies that productivity improvement will be the core driver of economic growth.In this context,the research in this paper focuses on the relationship between environmental regulations and manufacturing productivity.Theoretically,the heterogeneous firm model of Melitz(2003)is extended,and environmental regulation,technological upgrading,and environmental standard enforcement are gradually embedded in the heterogeneous firm model to build a general equilibrium analysis framework that includes the effects of environmental regulation policies and to analyze the micromechanisms of environmental regulation affecting firm,industry,and regional productivity.At the empirical level,micro firm-level data are used to provide comprehensive and detailed econometric tests and analysis for the findings of the theoretical analysis.The research in this paper has important theoretical and practical implications for the government to achieve a policy balance between environmental protection and high-quality economic development.The specific research of this paper is as follows:First,Chapter 3 examines the direct short-run impact of environmental regulation on the productivity of manufacturing firms from the perspective of the cost-effectiveness of environmental regulation.The article embeds environmental regulation in Melitz’s model of heterogeneous firms and constructs a partial equilibrium analytical framework in which environmental regulation affects firm productivity through cost effects.An econometric test is then conducted using a panel fixed effects model and a discussion of heterogeneous firms is included.The study shows that:(1)in the short run,environmental regulation directly increases the marginal cost of production of firms employing factor substitution and reduces firm productivity;(2)environmental regulation significantly reduces the marginal productivity of capital and labor factors and this factor substitution is positively correlated with the pollution intensity of firms;(3)the inhibitory effect of environmental regulations on firm productivity is more pronounced in labor-intensive and foreignowned firms.Second,Chapter 4 examines the heterogeneous effects of environmental regulation on firm productivity from the perspective of innovation compensation for environmental regulation.This chapter introduces firms’ technology choices and constructs a partial equilibrium analytical framework for the impact of environmental regulation on firm productivity through the compensating effect of technological innovation,followed by an econometric test using a panel quantile regression model.The study shows that:(1)under the heterogeneous distribution of firm productivity,environmental regulations promote productivity growth of high-productivity firms and suppress productivity of inefficient firms;(2)environmental regulation will force high-productivity firms to upgrade their technology,but not low-productivity firms and the technological innovation compensation effect of environmental regulation is positively related to firm productivity;(3)the technological innovation compensation effect of environmental regulation is slightly stronger in low-pollution industries;(4)the increase in firm productivity and market factor allocation efficiency will enhance the technological innovation compensation effect of environmental regulation.Again,Chapter 5 examines the impact of environmental regulation on industry productivity from the perspective of firm turnover.The paper further considers the dynamic entry and exit decisions of firms and constructs a general equilibrium analytical framework for the net entry effect of environmental regulation on industry productivity through firm turnover.This is followed by an econometric test using a Probit model and a panel fixed effects model,and a discussion of industry pollution heterogeneity is included.The study shows that:(1)environmental regulation raises the critical production technology and critical productivity of firms to survive in the market,accelerating the exit of low-productivity firms from the market and facilitating the entry of highproductivity firms;(2)in the long run,firm turnover strengthens the net entry effect productivity of firms,which in turn affects overall industry productivity,and this effect is positively related to the pollution intensity of firms;(3)environmental regulations have stronger entry deterrence and elimination effects on high pollution and low productivity firms,with no significant difference in the effects on high productivity firms.Then,Chapter 6 examines the heterogeneous impact of environmental regulations on industry productivity from the perspective of industry resource allocation efficiency.The chapter constructs a general equilibrium analytical framework in which environmental regulations act jointly on micro firms and thus affect industry productivity through three mechanisms: cost effect,innovation compensation,and resource replacement under the heterogeneity of industry resource allocation efficiency.This is followed by an econometric test using a panel fixed effects model and a panel threshold regression model,and a discussion of the contribution of the different effects is included.The study shows that:(1)the effect of environmental regulation on industry productivity has industry resource allocation efficiency heterogeneity,industry resource allocation efficiency,environmental regulation will increase industry productivity,otherwise it will reduce industry productivity;(2)environmental regulation,in general,promotes industry productivity,but has industry resource allocation efficiency threshold effect,the threshold value is 0.3263;(3)resource replacement effect is the industry productivity growth important source of industry productivity growth,and the technological innovation compensation effect is not given full play;(4)industry resource allocation efficiency is an important influencing factor on whether the technological innovation compensation and resource replacement effects of environmental regulation can work.Finally,Chapter 7 examines the effects of environmental regulations on firm location choice and regional productivity from the perspective of environmental standards enforcement.This chapter constructs a general equilibrium analytical framework for the effect of environmental regulation on regional productivity through firm location choice under the differences in environmental standards enforcement.It is followed by a quasi-natural experiment using a doubledifference model for econometric testing with the "Air Pollution Control Key Cities Delineation Program" and incorporates a discussion of heterogeneous firms.The study shows that:(1)the strengthening of environmental standards enforcement raises the critical production technology and productivity for enterprise survival,which is overall unfavorable to enterprise location selection;(2)under the distribution of enterprise productivity heterogeneity,enterprises with productivity higher than the critical value tend to be located in regions with strict environmental standards enforcement,and low-productivity enterprises tend to be located in regions with lax environmental standards enforcement;(3)foreign-funded enterprises tend to be located in regions with strict environmental standards enforcement,and heavy(3)foreign firms tend to prefer regions with strict environmental standards and heavy polluters tend to prefer regions with lax environmental standards;(4)environmental standards enforcement affects firms’ location choices mainly through market resource reallocation and enterprise innovation compensation mechanisms;(5)differential enforcement of environmental standards in the long run optimizes regional productivity in regions with strict environmental enforcement and also exacerbates interregional productivity differences.In general,this paper constructs a general equilibrium analysis framework that includes three effects of environmental regulation: cost effect,innovation compensation,and resource replacement and uses firm-level data for econometric tests to analyze the deep logic of environmental regulation and productivity evolution comprehensively.From the firm productivity analysis,the compensation effect of technological innovation and resource replacement effect are important paths for environmental regulation to enhance productivity,and the long-term enhancement ultimately relies on technological innovation.From the industry productivity analysis,the efficiency of industry resource allocation is the key factor for whether the innovation compensation and resource replacement effects can work.In terms of regional productivity analysis,regions with strict enforcement of environmental standards attract efficient enterprises and optimize regional productivity while exacerbating the productivity gap between regions.Accordingly,this paper argues that technological upgrading is the fundamental path to achieving a balanced development of environmental protection and economic growth and that the realization of technological upgrading requires local governments at all levels to focus on enterprise technological upgrading and innovation incentives,improve market resource allocation mechanisms,and implement environmental regulation policy.