Moderating effect of urban endowment factors on environmental regulations-productivity relationship in Beijing-Tianjin-Hebei region

Abstract

In this paper, six major cities in the Beijing-Tianjin-Hebei region of China are classified into two groups, namely core city (Beijing) and industrial cities. The objective is to analyze the moderating effect of urban endowments in different urban contexts on the environmental regulation-productivity relationship using an econometric model. The results are: As environmental regulation intensifies, production in Beijing's high-polluting industries rises after falling, showing “innovation compensation” and “inefficient exit” effects. In contrast, the high-polluting industries in the industrial cities exhibit a “compliance cost” effect. In Beijing, four urban endowment factors, including economic development, technological innovation, human capital, and government intervention, can provide supportive conditions for business development under environmental regulatory pressure, primarily by reducing the “compliance cost” effect and enhancing the “innovation compensation” effect. In industrial cities, on the other hand, urban endowment factors have not had a positive moderating effect, and government intervention has even had a negative effect. We argue that government intervention may be the more fundamental urban endowment factor, which may affect the moderating outcomes of other endowment factors. Based on these findings, we propose that governments should make greater use of guiding and incentive-based environmental policy instruments, while reducing administrative interventions. Appropriate policy instruments can activate the positive moderating role of urban endowments and thus provide a better supportive environment for firms' technological innovation.