Impact of Collaborative Agglomeration of Manufacturing and Producer Services on Air Quality: Evidence from the Emission Reduction of PM2.5, NOx and SO2 in China

Abstract

Industrial agglomeration is a major source of regional economic development and the main pattern enterprises employ after having developed to a certain stage. Industrial agglomeration also affects the emissions of air pollutants in production. Based on provincial panel data for China from 2006 to 2019, this paper introduces the full generalized least squares (FGLS) panel econometrics model. By considering spatial correlation, the potential endogenous problem has been controlled using the instrumental variable and the effects of the co-agglomeration of manufacturing and producer services on three major air pollutants, i.e., SO2, PM2.5, and NOx, have been empirically estimated. The empirical results show that: (1) The agglomeration of manufacturing increases the emission of PM2.5 in the air, while the agglomeration of producer services and the co-agglomeration of manufacturing and producer services reduce it. Moran correlation index test showed that SO2 and NOx had no significant spatial correlation. (2) The agglomeration of manufacturing, the agglomeration of producer services, and co-agglomeration exert the most significant effects on PM2.5 in the air in central and western China. This is probably because of the availability of basic natural resources in these areas. (3) The energy consumption structure mediates the effect of the agglomeration of manufacturing on PM2.5, and human capital mediates the effect of the agglomeration of producer services on PM2.5 emissions. Based on the results, policy suggestions to improve the atmospheric environment during the process of industrial agglomeration are proposed.