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1. The Porter Hypothesis Goes to China: Spatial Development, Environmental Regulation and Productivity

Author:
Pedro Naso, Yi Huang, and Tim Swanson
Publication Date:
10-2017
Content Type:
Working Paper
Institution:
Centre for International Environmental Studies, The Graduate Institute (IHEID)
Abstract:
We examine the relationship between environmental regulation and competitiveness in China. Exploiting exogenous changes in national pollution standards for three industries—ammonia, paper and cement—we test whether environmental regulation increases industry productivity. Our results show that the strong version of the Porter hypothesis does not hold, but that regulation might reallocate productivity spatially. We show that regulated industries that are located in newly developing cities see an increase in their productivity as compared to the same industries in other cities. This means that environmental regulation is more likely to drive the spatial distribution of productivity changes than it is to drive the pace and direction of technological change.
Topic:
Development, Environment, Science and Technology, Regulation, Productivity, and Competition
Political Geography:
China and Asia

2. How Does Environmental Regulation Shape Economic Development? A Tax Competition Model of China

Author:
Pedro Naso and Tim Swanson
Publication Date:
10-2017
Content Type:
Working Paper
Institution:
Centre for International Environmental Studies, The Graduate Institute (IHEID)
Abstract:
We propose a novel theoretical framework to study how environmental regulation shapes economic development in a developing country such as China. We develop a dynamic tax competition model in which local governments, located in development zones, use variation in taxes to attract workers to their jurisdictions. Their objective is to maximize tax revenue less local health costs that are proportional to local pollution. Our main result is that competition generates a reallocation of productive factors when national regulation is introduced. Local governments in more productive regions set greater production taxes than in other regions. This makes workers and output to shift from more to less developed regions of the country.
Topic:
Environment, Regulation, Tax Systems, Economic Development, and Competition
Political Geography:
China and Asia

3. Environmental Regulations and Competitiveness: Evidence based on Chinese firm data

Author:
Ankai Xu
Publication Date:
01-2016
Content Type:
Working Paper
Institution:
Centre for International Environmental Studies, The Graduate Institute (IHEID)
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 identifies an initial negative effect which diminishes after a period of two to three years.
Topic:
Environment, Regulation, Innovation, and Productivity
Political Geography:
China and Asia