Abstract
In this paper, we examine the influence of environmental regulation on sustainable economic growth from both theoretical and empirical perspectives. Our research is twofold. First, we apply a modified NEG (New Economic Geography) model to analyze how environmental regulation influences firms’ location choices and cities’ sustainable economic growth. Second, we test a spatial econometric model employing panel data of the three largest urban agglomerations in China from 2003 to 2013 to study the relationship between environmental regulation and sustainable economic growth as well as the spillover channels of economic activities. The results reveal a remarkable negative effect of environmental regulation on economic growth. In addition, we find no sufficient evidence to prove the existence of long-term effects of environmental regulation on economic growth in the three urban agglomerations. Furthermore, using different weight matrices to illustrate the different economic networks of the urban agglomeration, we validate the difference in spillover mechanisms across these three urban agglomerations. Specifically, the disparity in environmental regulation acts as a spillover channel for the Yangtze River Delta and the Pearl River Delta, while it is not significant for Jing-Jin-Ji.
Highlights
Over recent years, China has set mandatory targets for the reduction of pollution, sparking debate regarding the effects of environmental regulation on economic growth [1]
Concerning our core variable, environmental regulation, it seems to be an important factor for urban economic growth
This paper examined the influence of environmental regulation on the sustainable economic growth of urban agglomerations
Summary
China has set mandatory targets for the reduction of pollution, sparking debate regarding the effects of environmental regulation on economic growth [1]. Many studies have focused on how environmental protection might mitigate environmental problems, while fewer papers have analyzed the influence of these policies on economic growth from both spatial and network perspectives [2]. Li Keqiang, the current prime minister of China, argued that the economic growth at the expense of environmental degradation was not acceptable [3]. Though the national 12th FYP (five-year plan) targeted an annual average GDP growth of 7%, 26 of the 31 provinces have set growth goals above 10% in their provincial FYPs, indicating that governments continue to prioritize economic development [4]. Many cities even targeted annual GDP growth rates ranging from 12% to 17%
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