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Effects of environmental regulation on the upgrading of Chinese manufacturing industry

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Abstract

In recent years, China has constantly strengthened environmental regulation (ER) to force the manufacturing industry to upgrade. This study theoretically analyzes interaction mechanism of ER on the upgrading of manufacturing industry through foreign direct investment (FDI) and technological innovation (TI) and carries out empirical verification by using provincial panel data from 2000 to 2016 in China. The results demonstrate that the current ER intensity in China is unable to directly promote the upgrading of manufacturing industry, while through the interaction effects of FDI and TI do boost the upgrading of the industry. The above mechanisms are also robust even if we take the regional heterogeneity into consideration. Basic education and urbanization are favorable for the upgrading of the manufacturing industry. However, the increase in dependence on foreign trade is not conducive to upgrading manufacturing industry. Chinese government should further strengthen ER and give full play of the interaction mechanism of ER to guide the flow of foreign investment and force enterprises to carry out TI. In the meanwhile, Chinese government also needs to ensure balanced regional development, thus better promoting the upgrading of manufacturing industry.

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Notes

  1. In this research, we merge the three provinces in the Northeast into the eastern region, then the region divisions are shown as follows: the eastern region mainly includes 13 provinces and cities, i.e., Beijing, Tianjin, Hebei, Liaoning, Jilin, Heilongjiang, Shanghai, Jiangsu, Zhejiang, Shandong, Fujian, Guangdong, and Hainan. The central region mainly comprises 6 provinces, i.e., Shanxi, Anhui, Jiangxi, Henan, Hubei, and Hunan. Furthermore, the western region mainly consists of 11 provinces and cities, i.e., Inner Mongolia Autonomous Region, Guangxi Zhuang Autonomous Region, Chongqing, Sichuan, Guizhou, Yunnan, Shaanxi, Gansu, Qinghai, Ningxia Hui Autonomous Region, and Xinjiang Uygur Autonomous Region. Owing to lots of data of Tibet Autonomous Region are absent, this study only selects panel data of these 30 provinces and cities.

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Acknowledgements

The authors are grateful to the editors and the anonymous reviewers for their insightful comments and suggestions. This research is supported by the National Natural Science Foundation of China (Grant No.71373226).

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Authors and Affiliations

  1. School of Economics, Zhejiang University, Hangzhou, 310027, China

    Wen-Quan Hu

  2. Institute for Fiscal Big-Date & Policy of Zhejiang University, Hangzhou, 310027, China

    Wen-Quan Hu

  3. School of Economics, Zhejiang University of Finance & Economics, Hangzhou, 310018, China

    Tong Jin

  4. School of Business, Jiangnan University, Wuxi, 214122, China

    Yong Liu

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  1. Wen-Quan Hu
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  2. Tong Jin
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  3. Yong Liu
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Correspondence to Tong Jin.

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Hu, WQ., Jin, T. & Liu, Y. Effects of environmental regulation on the upgrading of Chinese manufacturing industry. Environ Sci Pollut Res 26, 27087–27099 (2019). https://doi.org/10.1007/s11356-019-05808-5

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