Strategic interaction of environmental regulation and green productivity growth in China: Green innovation or pollution refuge?

Abstract

The strategic interaction of inter-regional environmental regulation is a typical feature of local government behavior in China, which can affect the green productivity growth in the local region through the Porter effect and the pollution refuge effect. Based on the panel data of 274 prefecture-level cities from 2005 to 2015 in China, this thesis constructs a comprehensive indicator of environmental regulation, accurately identifies the mode of China's inter-regional strategic interaction of environmental regulation and calculates the green total factor productivity, green technology efficiency and green technology progress in 274 cities. In addition, this thesis also conducts an empirical analysis on the effect of the strategic interaction of environmental regulation on the green productivity in China. The author of this thesis finds that: (1) the mode of strategic interaction of environmental regulation in China is complementary "race to the top", that is, the local region will strengthen its environmental regulation, if the environmental regulations in its adjacent regions are strengthened; (2) the environmental regulation in the local region promotes the green productivity in China, while the weighted environmental regulation in the adjacent regions inhibits the green productivity. What's more, environmental regulations in economic-proximity regions have greater negative spatial spillover effects on green productivity in the local region, compared with those in geographic-proximity regions; (3) environmental regulation in the local region and its adjacent regions can affect the green productivity growth in China through the channels of green innovation and pollution transfer, that is, the Porter effect and pollution refuge effect coexist in China. They mean that in the process of China's regional environmental governance, it is necessary to reduce pollution transfer, and promote green innovation so as to achieve sustainable and high-quality economic development.

Keywords: Environmental regulation; Green innovation; Green productivity; Pollution refuge; Strategic interaction.