How Does Environmental Regulation Affect Industrial Transformation? A Study Based on the Methodology of Policy Simulation

Abstract EN

The difference of factor input structure determines different response to environmental regulation.

This paper constructs a theoretical model including environmental regulation, factor input structure, and industrial transformation and conducts a policy simulation based on the difference of influencing mechanism of environmental regulation considering industrial heterogeneity.

The findings show that the impact of environmental regulation on industrial transformation presents comparison of distortion effect of resource allocation and technology effect.

Environmental regulation will promote industrial transformation when technology effect of environmental regulation is stronger than distortion effect of resource allocation.

Particularly, command-control environmental regulation has a significant incentive effect and spillover effect of technological innovation on cleaning industries, but these effects do not exist in pollution-intensive industries.

Command-control environmental regulation promotes industrial transformation.

The result of simulation showed that environmental regulation of market incentives is similar to that of command-control.