Regional Environmental Regulation and IndustrialStructure Upgrading: Prefecture -Level Evidencefrom China

Abstract

Environmental regulation is not only an effective method to control pollutants and wastes, but also a vital factor that can be used to influence industrial structure. This study applies the panel data of 285 prefecture-level cities in China from 2004 to 2016 to verify spatial autocorrelation between industrial structure upgrading and regional environmental regulation and then uses dynamic spatial panel model (DSPM) to verify how regional environmental regulation both directly and indirectly influences industrial structure upgrading. There is a close spatial autocorrelation in Chinese cities between industrial structure upgrading and regional environmental regulation. The estimation results of DSPM show that regional environmental regulation only acts on that particular region’s industrial structural upgrading but not on the upgrading in other regions. The heterogeneity results show that from economic development, human capital, and foreign direct investment perspectives, regional environmental regulation is also able to reduce the negative impacts of industrial structure upgrading. The strengthening of both infrastructure and government intervention promotes industrial structure upgrading. This study provides effective empirical support for adjustments to China’s industrial structure and regional environmental regulation policy making.