Research On The Impacts Of Environmental Regulation Policy On Firms' Locational Choice And Exports

Over the past forty years of reform and opening up,Chi na's rapid economic development has been accompanied by very serious problems of environmental pollution.As the industrialization process enters a later stage,the contradiction between the production activities of firms and ecological protection,local economic development and environmental management become more and more serious.Beginning in the 1990s,the central government introduced a series of environmental regulatory measures to regulate the discharge of pollutants from regional industrie,and to strictly limit the production activities of high energy-consuming firms.Although statistics show that China's overall pollution emissions have been reduced,and certain results have been achieved in ecological restoration,the problem of environmental pollution is still serious,and there is a big gap between the actual effect of environmental regulatory policies on curbing industrial pollution and expectations.Regrettably,most of the current literature takes the effectiveness of China's environmental policy implementation as the premise and starting point of analysis,and does not systematically and deeply analyzed and explained the distortion in the implementation of China's environmental regulation policy from a microscopic perspective.This study tries to make effort to fill the gaps in relevant research.Based on existing research,this paper attempts to evaluate the implementation effect of environmental regulatory policies.Based on a series of concepts such as pollution free-riding,government incentive distortion and peer effect,this paper focuses on the locational choice and exporting decision of firms,and discusses the free-riding behavior during the process of the firms'locional choice caused by the implementing of environmental regulations,the adjustment behaviour of polluting firms in the context of changes in local government fiscal constraints,the export behavior of firms in the context of intergovernmental policy implementation collusion,and the export decision behavior of firms in the context of export peer effects.This study attemptes to uncover the causes of distortions in environmental regulation policies from a micro-perspective.The research in this paper combines microdata,statistical yearbook data,and a range of geographic and meteorological datasets together with recently developed frontier measurement models.Firstly,this paper takes the two-control zone policy as an example to analyze the free-riding problem of environmental regulation and firm location decision.This paper uses address information in industrial firm database to locate its longitude and latitude and build enterprise wind model to measure wind direction of firm and its distance to the administrative boundary along wind direction.A triple difference model is constructed based on the establishment of two control areas in China in 1998as a quasi-natural experiment.It is found that in the cities close to the provincial boundaries after 1998,and in the area among city where the perennial wind direction is upwind relative to the administrative boundary,the highly polluting firms are located closer to the borders of neighbouring provinces.This finding suggests that,with stricter environmental regulation policies,polluting firms will consider choosing their locations with the help of wind power to transport pollutants to the neighboring provinces.Such result remains unchanged after a series of robustness tests.The empirical evidence in this part suggests that environmental regulatory policies ma ke the problem of firm free-riding of SO₂ emissions more pronounced.The results also strengthen the importance of environmental regulation in border areas and the implementation of regional joint prevention and control measures to avoid fragmentation in the implementation of environmental regulatory policies by local governments,and thus to prevent the spread of environmental pollution because of firms'free-riding behavior.Secondly,this paper considers the impact of local fiscal pressures on the choices of polluting firms in the context of environmental regulation policies.Using the exogenous shock of the 2005 agricultural tax and fee reform,it examines how the abolition of agricultural taxes puts financial pressure on local governments at the county level,and thus change the impact of environmental regulation policies firms'decision of locational choice.In this part,we take the county-level administrative districts with more than three levels of rivers passing through them as the study sample and construct a tripledifference model for analysis.We find that the number,industrial value added and gross industrial output of firms in water-polluting industries in counties within provincial administrative districts increase significantly.After the elimination of the agricultural tax,the production activities of water-polluting industries in counties located in the most downstream of rivers in provincial border areas increase significantly as compared to the activities of its neighbouring water-polluting industries in the uppermost counties of rivers in the provincial border region.A series of empirical results indicate that due to the increased financial constraints on local governments,the effect of environmental regulation policies to prevent polluting firms from agglomeration in key environmental areas(water sources such as rivers)is greatly weakened,and the level of river pollution in the corresponding areas increases significantly.The research in this part shows that the evaluation of th e effectiveness of environmental regulatory policies needs to consider the impact of local government enforcement on the location of firms.Particularly,attention needs to be paid to the impact of changes of fiscal constraints of local government incentives on firms'locational choices.Thirdly,this paper analyzes the pollution reduction enforcement of local governments in the context of environmental regulation and the changes in the export of polluting industries in their regions.By constructing indica tors of fluctuations in the annual ranking of municipalities in the province during the Eleventh Five-Year Plan period,and using the customs database to get the export value indicator of the industry at the local level,this study finds that the more dramatic the fluctuations in the annual sulfur dioxide emission reduction ranking of cities within provinces,the higher the export values in sulphur dioxide heavily polluting industries due to provinces'weaker enforcement of pollution reduction.The core results pass several robustness tests based on various measurement models such as triple difference and three-stage least squares methods.This finding reveals that,in the face of strict central government policies on environmental regulation,local governments may be complicit in the implementation,and strategically adjusted the disclosures of reported SO₂ emission reduction data.The greater the likelihood of such adjustments,the lower the enforcement of emission reductions,the thus the less effective the actual environmental regulation.This study reveals that the strategic and collusive response of local governments to intra-regional pollution control has weakened the impact of environmental regulations on high-polluting industries.From the perspective of the strategic disclosure of local government emission reduct ion data,this section confirms that the difference of target incentives of central and local governments in policy implementation fails to reach desirable effect,revealing that local government complicity is an important factor when considering the effect of environmental regulation on firms'behavior.Fourthly,this paper analyzes how the effects of environmental regulation on fims'export behavior changes due to the mutual imitation behavior of firms in polluting industries and in highly polluted areas.By using data on the micro-matching of customs export products with listed firms,and by introducing revenue shocks as exogenous variables to identify peer effects of firms'export behavior,this section finds that firms'export value,range of export products and number of export destinations are significantly affected by peer firms'export behavior.The second part examines whether peer effects changes the impact of environmental regulations on firms'export behavior.We find that due to the existence of peer effects,the impact of environmental regulations on firms'export behavior becomes more pronounced in high polluting industries and polluting areas when they are subjected to stringent regulations.The results in this part shows that peer effects amplify the influence of environmental regulation on export behavior.