The impact of environmental regulation on employment: an empirical study of China’s Two Control Zone policy

  • Wenyuan Sun
  • Qin Yang
  • Qing Ni
  • Yoomi KimEmail author
Research Article


Environmental regulations affect employment through productivity output and factor substitution. This paper employs a difference-in-differences (DID) method to investigate the effect of China’s Two Control Zones (TCZ) policy on the urban employment in 287 cities from 1994 to 2009. We apply the DID method to two time points: 1998 for policy issuance and 2000 for the policy implementation. From the results of analyses on full-sample cities, the TCZ policy did not contribute to increasing total urban employment. Moreover, a negative impact on employment resulted from sulfur dioxide and acid rain controls in secondary and tertiary industries, respectively. In the acid rain control zone, the TCZ policy increased the average wage of urban workers. Negative effects on employment were observed in larger cities. The policy triggered labor migration from larger to smaller cities, resulting in significant increases in primary and tertiary industry employment in smaller cities, although the effects on mid-size cities were insignificant. This study provides important empirical evidence and insight into the impact of the TCZ policy on urban employment.


City size Difference-in-differences Employment Environmental regulation Income Two Control Zones policy 


Funding information

This work was supported by the National Natural Science Foundation of China (Grant No. 71573136) and the Ewha Womans University Research Grant of 2018.


  1. Berman E, Bui LT (2001) Environmental regulation and labor demand: evidence from the south coast air basin. J Public Econ 79(2):265–295CrossRefGoogle Scholar
  2. Bezdek RH, Robert MW, DiPerna P (2008) Environmental protection, the economy, and jobs: national and regional analyses. J Environ Manag 86(1):63–79CrossRefGoogle Scholar
  3. Chinese Government (2010) China mid and small cities development reportGoogle Scholar
  4. Dissou Y, Sun Q (2013) GHG mitigation policies and employment: a CGE analysis with wage rigidity and application to Canada. Can Public Policy 39(2S):S53–S65CrossRefGoogle Scholar
  5. Fan H, Mu H (2017) Impact of environmental regulation on employment of urban dual labor force-based on the perspective of labor market segmentation (in Chinese). Econ Theory Bus Manag 2:34–47Google Scholar
  6. Gray WB, Shadbegian RJ, Wang C, Meral M (2014) Do EPA regulations affect labor demand? evidence from the pulp and paper industry. J Environ Econ Manag 68(1):188–202CrossRefGoogle Scholar
  7. Greenstone M (2002) The impacts of environmental regulations on industrial activity: evidence from the 1970 & 1977 clean air act amendments and the census of manufactures. Polit Econ 110(6):1775–1219Google Scholar
  8. Guo Q, Sun Y (2015) Effects of environmental regulation policy on pollution discharge intensity. J Shandong Univ Financ Econ 5:54–69Google Scholar
  9. Kahn ME, Mansur ET (2013) Do local energy prices and regulation affect the geographic concentration of employment? J Public Econ 101(1):105–114CrossRefGoogle Scholar
  10. Kim Y, Tanaka K, Whang X (2017) A spatial analysis of the causal factors influencing China’s air pollution. Asian J Atmos Environ 11(3):194–201CrossRefGoogle Scholar
  11. Kim Y, Tanaka K, Ge C (2018) Estimating the provincial environmental Kuznets curve in China: a geographically weighted regression approach. Stoch Environ Res Risk Assess 32(7):2147–2163Google Scholar
  12. Kondoh K, Yabuuchi S (2012) Unemployment, environmental policy, and international migration. J Int Trade Econ Dev 21(5):677–690CrossRefGoogle Scholar
  13. Li Y (2011) The effect of energy environment policy on growth, employment and emission reduction: research based on CGE model (in Chinese). Zhejiang University, HangzhouGoogle Scholar
  14. Li M (2016) Environmental regulation, industrial heterogeneity and employment effect-experience analysis based on the panel data of industrial sectors (in Chinese). Popul Econ 1:66–77Google Scholar
  15. Lou CL, Ran M (2016) Effects of environmental regulation policy on pollution (in Chinese). J Chongqing Univ (Social Science Edition) 10:87–95Google Scholar
  16. Shi M, Wang Y (2016) Environmental regulation difference, industry characteristics and employment dynamic (in Chinese). South China J Econ 35(7):48–62Google Scholar
  17. Shimer R (2013) A framework for valuing the employment consequences of environmental regulation. Working PaperGoogle Scholar
  18. State Administration for Environmental Protection (1998) No. 86, The Plan for division of acid rain control zone and SO2 pollution control zoneGoogle Scholar
  19. Tang Y, Liang R (2012) Two Control Zone policy and SO2 emission reduction – experience research based on multiple difference method (in Chinese). J Shanxi Univ Financ Econ 6:9–16Google Scholar
  20. Walker WR (2011) Environmental regulation and labor real location: evidence from the clean air act. Am Econ Rev 101(3):442–447CrossRefGoogle Scholar
  21. Wu M, Zhou S, Chen J (2016) Whether win-win pattern of environmental regulation and economic growth could be realized – empirical research based on China’s “Two Control Zone” (in Chinese). Mod Econ Sci 6:44–54Google Scholar
  22. Xue ML, Wang KK (2013) An empirical analysis on regional differences in pollutants discharge reduction and environmental investment: based on data of Chinese thirty major cities. Adv Mater Res 726-731:1422–1426CrossRefGoogle Scholar
  23. Yan W, Guo S (2016) How China’s environmental regulation affects employment – experience analysis based on the panel data of industrial sectors (in Chinese). CEFE 10:105–112Google Scholar

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.School of EconomicsNanjing Audit UniversityNanjingChina
  2. 2.Department of Public AdministrationEwha Womans UniversitySeoulRepublic of Korea

Personalised recommendations