Environmental regulation, technological innovation, and industrial structure upgrading

Abstract

The conflict between rapid economic development, resource mismatch, and ecological damage is growing more severe. Industrial structure upgrading, as a bridge between economic activity and the ecological environment, is a crucial strategy for solving ecological and environmental problems. Based on the mediating effect and threshold models, this study selected 30 provincial panel data points in China from 2000 to 2020 to study the impact of environmental regulation and technological innovation on industrial structure upgrading. According to the findings, environmental regulation has a “U” shaped impact on industrial upgrading and passes the three threshold tests, with technological innovation playing a partially positive mediating role. There is regional heterogeneity in the impact of environmental regulation on industrial upgrading, with a “U” shaped impact on the eastern regions; there is inhibited industrial upscaling in the central and western areas. Foreign trade hinders industrial development in the eastern region but promotes rapid development and achieves structural adjustment in the central and western areas. The expansion of fixed asset investment hinders industrial restructuring. Government regulation can encourage industrial structure upgrading in all regions. We propose policy recommendations based on China’s current situation. The development of technological innovation should be promoted, and environmental rules should be differentiated according to local conditions. This study has a certain guiding significance and reference value for balancing environmental governance and economic development, effectively implementing an innovation-driven development strategy, and formulating China's regional development strategy.