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Can environmental regulations break down domestic market segmentation? Evidence from China

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Abstract

While local protectionism and market segmentation owing to fiscal decentralization are not conducive to broad economic development, they may be rational choices on a local scale. Based on a spatial Durbin model, we analyzed the relationship between environmental regulations and market segmentation in China using interprovincial panel data for 2004–2018. The results indicated that the “beggar-thy-neighbor” phenomenon persists in China; environmental regulations have a U-shaped impact on market segmentation, i.e., in most regions, environmental regulation can break down market segmentation. Regions with greater decentralization are better able to promote local market integration through environmental regulation, suggesting that local governments are better able to compensate for market failures when vested with greater power. Hence, we propose that the central government should improve performance evaluation indicators for local governments and grant them greater autonomy; additionally, local governments should increase the intensity of environmental regulations as appropriate, thereby promoting both environmental protection and the unification of domestic markets.

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Data availability

The datasets used in this study are available from the corresponding author on reasonable request.

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Acknowledgements

We thank the editors and anonymous reviewers for their constructive comments, and we would also like to thank Editage (www.editage.cn) for English language editing.

Funding

This work was supported by the National Natural Science Foundation of China [grant no. 71974001], the Major Research Projects of Natural Science in Universities of Anhui Province of China [grant no. KJ2017ZD35], and the Top Talent Project in Anhui Province [grant no. gxyqZD2020087].

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Authors and Affiliations

  1. School of Statistics and Applied Mathematics, Anhui University of Finance and Economics, Bengbu, Anhui, 233030, People’s Republic of China

    Aolin Lai, Zhihui Yang & Lianbiao Cui

Authors
  1. Aolin Lai
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  2. Zhihui Yang
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  3. Lianbiao Cui
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Contributions

Aolin Lai, formal analysis, investigation, software, and writing (original draft); Zhihui Yang, conceptualization, writing (review and editing), supervision, resources, project administration, and funding acquisition; Lianbiao Cui, methodology, investigation, validation, and writing (review and editing).

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Correspondence to Zhihui Yang.

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Lai, ., Yang, Z. & Cui, L. Can environmental regulations break down domestic market segmentation? Evidence from China. Environ Sci Pollut Res 29, 10157–10172 (2022). https://doi.org/10.1007/s11356-021-16387-9

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