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Sustainability 2017, 9(4), 571;

The Impacts of Environmental Regulation on Industrial Activities: Evidence from a Quasi-Natural Experiment in Chinese Prefectures

School of Economics, Renmin University of China, Beijing 100872, China
Department of Economics, Hong Kong Baptist University, Kowloon Tong, Hong Kong 999077, China
Author to whom correspondence should be addressed.
Academic Editors: Fabio Carlucci and Giuseppe Ioppolo
Received: 23 February 2017 / Revised: 2 April 2017 / Accepted: 6 April 2017 / Published: 9 April 2017
(This article belongs to the Section Economic, Business and Management Aspects of Sustainability)
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We assess the effectiveness of China’s Two Control Zones (TCZ) policy, an environmental policy that tightens the control of acid rain and the emission of sulfur dioxide (SO2) in targeted areas. To identify the effect of the policy on industrial activities, we use the difference-in-differences (DID) method to study industry-level activities in China’s prefectures based on a unique firm-level data set covering the period from 1999–2009. We find that stricter environmental regulation led to a lower level of polluting industrial activities in TCZ prefectures, which was associated with more closures of polluting firms in targeted prefectures and more new polluting firms in non-targeted locations. In addition, our findings suggest that the TCZ policy had more pronounced effects in the coastal areas and became more effective after China changed its assessment criteria for the performance of local officials in the late 2000s. View Full-Text
Keywords: environmental regulation; air pollution; acid rain; China environmental regulation; air pollution; acid rain; China

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Chen, B.; Cheng, Y.-S. The Impacts of Environmental Regulation on Industrial Activities: Evidence from a Quasi-Natural Experiment in Chinese Prefectures. Sustainability 2017, 9, 571.

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