The Impact Of Environment Regulation On Upgrading Industrial Structure

Under the new normal economy, the constraint of resources and the environment for economic development is strengthening, sustainable economic development requires greater to advance quality of economic growth, industrial structure upgrading, and environmental protection. The key to maintain a balance between economic development and environmental protection lies in transformation of economic development and adjustment of industrial structure. Environmental regulation policies, which as the government’s macroscopical adjusting control, could affect the market players’ microscopic behavior of investment and promote resource flow among industries. Environmental regulation, mainly through changes in production costs, making the regulated industry entry barriers, inhibiting the regulated industry development policy to stimulate the development of new industries, thus affecting the upgrading of industrial structure.In this paper, the panel data of Chinese 30 provinces from 2004-2012 has been used for study, and the static panel model and panel vector autoregression model have been applied to study if environmental regulation could affect the upgrading of industrial structure through the entry barriers. The empirical results are as follow:Firstly, when environmental regulation intensity is at a low level stage, environmental regulation and upgrading of industrial structure has a positive correlation, ie, the higher the intensity of environmental regulation, the more employment of the regulated industry and the higher scale of the regulated industry. The effect of entry barriers to environmental regulation is negative; the increasing intensity of environmental regulation cannot suppress the regulated industry, and the scale of the second industrial has further expanded. When environmental regulation intensity is at a high level stage, a negative correlation between environmental regulation and upgrading of industrial structure exists, environmental regulation and corporate enter have a negative correlation, and the mediating effect of entry barriers is significant, indicating that environmental regulation can inhibit the regulated companies’ entry and encourage new businesses to enter the emerging industry.Secondly, the dynamic study of PVAR model shows environmental regulation has a negative impact to industrial structure upgrading; environmental regulation has a positive impact to entry barriers; entry barriers has a negative impact to the upgrading of industrial structure; in addition, the dynamic impact influence achieve the maximum in the current period, then reduce by period. Environmental Regulation has a very strong explanation ability on the upgrading of industrial structure, but the entry barriers can only partially explain the upgrading of industrial structure.Finally, according to the findings of the empirical part, it is recommended to implement more stringent industrial policy, make more stringent entry criteria, and utilize taxes or subsidies or other policy levers to guide the transformation and upgrading of industrial structure.