| Nowadays, downward pressure on China’s economy is mounting and deep-seated problems have become prominent. It is imperative to adjust industrial structure and implement pollution prevention. The challenge confronted by the government is to seize the trend of slowdown in economic growth, find out the balance point between structure adjustment and pollution prevention, and finally achieve the win-win goal of economic growth and environmental improvement.This paper examines whether the enforcement of environmental regulations plays a positive role in industrial structural adjustment as well as in environmental improvement. Besides, under the decentralized system, local governments may vary in environmental regulation stringency through engaging in policy competition intentionally or unintentionally. Therefore, this paper also aims to fine evidences of such competition, and estimate its influence on regional industrial layout, which could be taken as a further discussion upon the impact of environmental regulation on industrial structure.Specifically, this paper measures the stringency of environmental regulation and level of industrial structure with panel data of 279 Chinese cities from 2003-2013, and empirically tests the effects and mechanisms of environmental regulation on structural adjustment using fixed-effect model and spatial Durbin model. Main findings are as follows: 1) As a whole, the stringency of environmental regulation is effective in promoting the upgrading of industrial structure in China. 2) Environmental regulation influences enterprise’s behavior and promote the adjustment of regional industrial structure via production cost, technological innovation and entry barriers mechanism. 3) Due to the competitive behavior of regional governments, the difference in environmental regulation stringency across regions induces industrial structure adjustment, as it influences the comparative advantage and competitive performance through industry transfer and specialization mechanisms. 4) The impact of regulatory competition on structural upgrading differs between eastern and mid-western regions because of different strategies taken by local governments. |
