Environmental Regulation and Employment Changes in Chinese Manufacturing Enterprises: Micro Evidence from the Top 10,000 Energy-Consuming Enterprises Program

Abstract

This study investigates the impact of the Top 10,000 Energy-Consuming Enterprises Program (hereafter referred to as the carbon reduction policy) implemented by the Chinese government in 2011 on the employment of manufacturing enterprises. The study indicates that the implementation of the carbon reduction policy has two ways of impacting the employment scale, namely ‘employment creation’ and ‘employment destruction’. The actual effect of the policy on the employment scale depends on the superposition of these two effects. Based on a sample data set of Chinese manufacturing enterprises, the generalized propensity score-matching method (GPSM) is used to identify the causal relationship and its mechanism between the carbon reduction policy and the employment scale. The study reveals several findings. First, the carbon reduction policy positively affects the employment of Chinese manufacturing enterprises, and the employment scale demonstrates an inverted U-shaped relationship as the policy intensity gradually increases. Second, the carbon reduction policy affects the employment scale of Chinese manufacturing enterprises through two pathways of employment creation and employment destruction. Third, the promotion effect of the carbon reduction policy on the employment scale of different types of enterprises is heterogeneous and is influenced by factors such as institutional environment, ownership type, and industry pollution characteristics. These findings remain robust under different samples and empirical methods. The results of this study demonstrate that China’s top 10,000 Energy-Consuming Enterprises Program can achieve a ‘win-win’ situation by ensuring environmental protection and stable employment.