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[The 9th AIEA-NBER Conference] Working Paper - Jacquelyn Pless

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DATE 2021.11.17 15:55

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Environmental Regulation and Productivity Are Not Always at Odds: Evidence from Firms in China

 

Yangsiyu Lu

Jacquelyn Pless

 

AIEA Working Paper A210801   Issue date July 2021

 
 
Pollution impedes economic growth and development, but environmental regulation
also can be costly. In this paper, we study the eects of an environmental regulation
on rm productivity in China across the entire industrial sector. We nd that produc-
tivity for rms in less pollution-intensive industries increases while there is no eect
on those in the \dirtiest" industries. The net eect is therefore positive, highlighting
the importance of considering rms across all industries when studying how regulation
impacts economic activity. We explore the underlying mechanisms and nd that there
is no rm exit, on average, or input reallocation. Rather, rms use inputs more e-
ciently, although the the drivers vary based on rm ownership. Our ndings suggest
that environmental regulation can be a tool for fostering growth.
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