Do pollutant discharge fees affect labor demand? evidence from china’s industrial enterprises

Abstract

ABSTRACT The tradeoff between employment and the environment has become an increasingly important topic. By employing two enterprise-level datasets and a city-level dataset in China for the period 1999–2012, this study investigates the influence of pollutant discharge fees on the labour demand in manufacturing enterprises. Besides, considering the significant differences among cities, industries, and individuals in China, we perform a series of heterogeneity analysis. The study also explores the mediation impact mechanism from the manufacturing cost perspective, i.e. labour cost effect, energy cost effect, and equipment cost effect. The estimated results show that: (1) The more stringent pollutant discharge fees can significantly reduce the labour demand of Chinese manufacturing enterprises; for each 1% increase in the price of pollutant discharge fees, labour demand decreases by approximately 0.264%; (2) labour demand for cities with a low proportion of secondary industries, industries with low pollution intensity, and domestic private-owned enterprises tend to be influenced more by pollutant discharge fees; and (3) the labour cost effect and energy cost effect are both significant mediators, while the equipment cost effect is not significant. The above findings can provide feasible policy implications for improving environmental protection taxes.