On the relationship between the energy conservation and emissions reduction policy and employment adjustment by manufacturing firms: Microdata from China

Abstract

In the “Action Plan for 10,000 Firms to Save Energy and Lower Carbon Emissions,” China assigns responsibility for achieving the overall goal of achieving energy conservation and emissions reduction (ECER) to firms, which strengthens monitoring of ECER and pollution control. Based on the data on Chinese industrial firms and customs during 2010 and 2013, this paper analyzes the effect of ECER policy on employment adjustment with a difference-in-difference (DID) model and a mediating effect model. The results indicate that ECER policy significantly promotes net job growth by increasing firms’ job creation effect and weakening the job destruction effect. For every 1% increase in ECER policy intensity, net job growth increases by 8.04%. The heterogeneity analysis shows that ECER policy weakens net job growth at firms with high export intensity, high market concentration, and high pollution and increases net job growth at firms in regions that are highly market based. ECER policy promotes job growth through the mediating mechanism of the productivity effect and adjustment in the scope of exports. Our results are helpful for assessing the shock to employment from Chinese environmental policy and provides feasible policy suggestions for adjusting existing laws and regulations to achieve higher social welfare.