Abstract
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.
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Notes
“National standard system” refers to “National Standard of People’s Republic of China,” a series of standards covering all walks of life first issued in 1995. In the category of “Environmental air quality standards,” a grade of 2 was set for average yearly SO2 emissions between 0.02 and 0.06 mg per cubic meter.
The primary industries were agriculture, forestry, animal husbandry, and fishery. Secondary industries included polluting industries as coal, gas, chemicals, metallurgy, nonferrous metals, and building materials. Tertiary industries included non-material production sectors such as commerce, finance, insurance, real estate, transportation, communication, and services.
Unlike traditional practices, we applied a cluster-robust standard error to estimate model results. The comparison of the general errors was around half that of cluster-robust standard errors. This can be attributed to the fact that disturbance terms of a same city in different periods have an auto-correlation, while the precondition assumption for defaulted general standard error is disturbance terms that are of the same and independent distribution. Thus, an estimate of general standard error is not suitable for this study.
According to the report, a super-megacity has a population of more than 10 million, a megacity has a population of five to 10 million, and big city has a population of one to five million.
As shown in Figures 3, 5, 6, and 7, employment decreased greatly after 1977, likely for three reasons: first, the Asian financial crisis that began in 1997 triggered company layoffs; second, between 1998 and 2000, more than 20 million employees lost their jobs at Chinese state-owned enterprises; and third, the labor force reserve was large under the original planned economic system, whereas following labor reform, recessive unemployment was publicized. However, this did not play a major role in the empirical analysis in this paper.
It should be noted that both the criteria and the number of cities in the China City Statistical Yearbook are different every year and that data for some cities are not complete. When we were processing these data, we eliminated cities with inconsistent data or too much missing data, and as such, our panel data are not balanced. However, non-balanced panel data do not affect intra-group estimates, and thus, we could still estimate the fixed-effects model.
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This work was supported by the National Natural Science Foundation of China (Grant No. 71573136) and the Ewha Womans University Research Grant of 2018.
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Sun, W., Yang, Q., Ni, Q. et al. The impact of environmental regulation on employment: an empirical study of China’s Two Control Zone policy. Environ Sci Pollut Res 26, 26472–26487 (2019). https://doi.org/10.1007/s11356-019-05840-5
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DOI: https://doi.org/10.1007/s11356-019-05840-5