Does economic agglomeration affect haze pollution? Evidence from China's Yellow River basin

Abstract

Economic agglomeration is an important driving force for China's economic growth and the transformation of its industrial structure. However, whether economic agglomeration is accompanied by haze pollution is a major concern for environmental managers and policymakers. As one of the most significant ecological barriers and major economic zones, China's Yellow River basin faces severe air pollution. Hence, taking energy consumption as an input factor and haze pollution as an undesirable output in an output density model, this study investigates, both theoretically and empirically, the transmission mechanisms among economic agglomeration, labor productivity, and haze pollution. We construct a spatial Durbin model to verify the explanatory power of our theoretical model based on panel data for 74 cities in China's Yellow River basin during 2005–2016. Economic agglomeration's effect on haze pollution is further tested using a mediating effect model and the instrumental variable method. The results show that there is an N-shaped relationship between economic agglomeration and haze pollution and a U-shaped relationship between labor productivity and haze pollution. Labor productivity is an important mediator in economic agglomeration's effect on haze pollution. Haze pollution not only has path dependence in the time dimension but also has a significant spillover effect in the spatial dimension. Therefore, we propose actively cultivating urban agglomeration in the Yellow River basin, enhancing the degree of economic agglomeration, and improving regional haze pollution prevention and control mechanisms.