Exploration on Inter-Relation of Environmental Regulation, Economic Structure, and Economic Growth: Provincial Evidence from China

Abstract

The potential effect of implementing environmental regulations on economic growth has been a controversial issue for a long time. Environmental regulations may impact on economic growth by reconstructing the economic structure. With the intention of exploring the nature of this mechanism, it is important to understand the internal inter-relation of the three parties, requiring data from a large economy experiencing the transition in economic structure. This paper selects panel data for 30 provinces in China from 2008–2019, constructs a PVAR model, and empirically examines the dynamic relationship among environmental regulation, economic structure reconstruction, and economic growth. The results demonstrate that there is a two-way effect between environmental regulation and economic growth. In other words, environmental regulation has a “U” shape effect on economic growth, which first inhibits and then promotes economic growth, while economic growth has a strong and then weak promotion effect on environmental regulation. Economic growth has a short-term negative impact on economic structure reconstruction, whereas economic restructuring has a long-term beneficial impact on environmental regulation. Therefore, the government should reasonably set the intensity of regulation and optimize the path of economic restructuring to deal with the relationship between environmental regulation, economic structure reconstruction, and economic growth.

The impact of environmental regulation on regional economic growth: A case study of the Yangtze River Economic Belt, China

“…Some current studies have some similarities with the results of this paper. Tian et al [ 45 ] believed that the regulation and control of environmental regulations has a "U-shaped" effect on economic growth, which first inhibits and then promotes economic growth. [ 46 ] believes that environmental regulation and economic development have regional heterogeneity, and the Yangtze River Economic Belt is mainly located in the central and southern regions of China.…”

The Impact of Environmental Regulation on Collaborative Innovation Efficiency: Is the Porter Hypothesis Valid in Chengdu–Chongqing Urban Agglomeration?

“…Environmental resources are public property [34] and the government can protect environmental ownership through regulation. ER refers to the government's use of laws and regulations to constrain polluting behavior caused by social activities [35]. Because reducing pollution is not a natural behavior, regulatory systems are needed to curb polluting activities.…”

“…Some scholars have also measured it from the perspective of pollution control investment. The amount of pollution treatment investment, the capital stock, and the number of people in the environmental protection system are also measurable indicators [35,44].…”

Influence of healthy human capital and environmental regulation on green total factor productivity in China

“…Chatzistamoulou et al (2017) examine the effect of pollution abatement on manufacturing productivity in Greece. Tian et al (2023) find a U‐shaped relationship between environmental regulation and economic growth based on an analysis of Chinese provincial panel data spanning from 2008 to 2019. Chen and Hu's (2022) combination of a panel threshold model and spatial Durbin model reveals a non‐linear relationship between environmental regulation and economic growth realized through the path of technological innovation.…”