Assessing the Impact of a Regional Integration Policy on Corporate Environmental Performance: Micro-Evidence from Chinese Industrial Firms

Abstract

Environmental performance is extremely vital for sustainable growth in China, and the impact of a regional integration policy plays an important role in improving environmental performance. However, current studies are weak in causal inference, and firm-level evidence is lacking. As a result, taking the Outline of the Pearl River Delta Reform and Development Plan as a quasi-natural experiment, with propensity score matching and difference-in-differences methods, this paper investigates the effect of regional integration on firms’ environmental performance. Our empirical results show that regional integration can significantly improve corporate environmental performance; specifically, the regional integration will result in an increase in the output value, of 46.7%, 22.3%, and 68.1% per unit emission of sulfur dioxide (SO2), industrial wastewater (WATER), and industrial smoke and dust (SD). Moreover, the impact of regional integration differs across different industries. For SO2, the impact of regional integration is greater for the petroleum processing, coking and nuclear fuel processing industries, and special equipment manufacturing; in terms of WATER, the impact is much higher in the tobacco products industry and printing and the reproduction of recording media industry; for SD, the petroleum processing, coking, and nuclear fuel processing industries are highly impacted. Finally, this impact also differs for core and peripheral cities. For policy implications, first, regional integration policies are highly recommended, and China is implementing regional integration in the Beijing–Tianjin–Hebei area and Yangtze River Delta, and these policies should be enhanced for other areas. Second, to maximize the effect of regional integration, the government needs to combine regional industrial structural characteristics to formulate industrial and environmental policies.