An Empirical Research On Environmental Regulation, Factor Endowment And International Industrial Competitiveness

This paper constructed a panel database of 24 manufacturing industries of China during 1996-2004. Using econometrical software Stata10.0, I made FGLS regression estimations, instrumental estimations and robust tests to analyze the relationship between environmental regulation and international competitiveness. I emphatically constructed indicators of environmental regulation, international competitiveness and pollution intensity, and according to the calculation of pollution intensity, I classified the industries into cleaning industries and pollutional industries. I introduced the square of environmental regulation into regression model in order to analyze the double effects on competitiveness, and also I introduced factor endowment indicators to differentiate environmental regulation effect and factor endowment effect.The descriptive analysis tells us that the higher the environmental regulation is, the lower international competitiveness is, and the physical and human capital intensive industries are less competitive. The empirical analysis also finds that the relationship between environmental regulation and international competitiveness is negative, but in the long run, the relationship will be the shape of "U", that is, before the point of inflexion, environmental regulation hinders the competitiveness, once after that point, environmental regulation will increase the competitiveness.