Preprint Article Version 1 This version is not peer-reviewed

Environmental Regulation, Upgrading of Industrial Structure and Economic Fluctuation

Version 1 : Received: 8 November 2018 / Approved: 13 November 2018 / Online: 13 November 2018 (15:11:13 CET)

How to cite: Zhang, D.; Chen, L. Environmental Regulation, Upgrading of Industrial Structure and Economic Fluctuation. Preprints 2018, 2018110319 (doi: 10.20944/preprints201811.0319.v1). Zhang, D.; Chen, L. Environmental Regulation, Upgrading of Industrial Structure and Economic Fluctuation. Preprints 2018, 2018110319 (doi: 10.20944/preprints201811.0319.v1).

Abstract

This paper utilizes dynamic panel threshold technology to conduct a nonlinear test on the direct effect between environmental regulation and economic fluctuations and the effect of industrial structure upgrading by taking 35 industrial sectors in China from 2003 to 2016 . The research has found that there is an inverted "U" relationship between environmental regulation and economic fluctuations, with the enhancement of environmental regulations, the economic fluctuation increases first and then decreases. The cross-terms of environmental regulation and industrial structure rationalization or industrial structure upgrading are significantly negative, which indicates that the enhancement of environmental regulation is conducive to promoting industrial structure upgrading and reducing the economic fluctuations. While the rationalization factors of industrial structure and advanced industrial structure are significantly negative, indicating that both forms of industrial structure upgrading are conducive to reducing the economic fluctuations. Environmental regulation has technical innovation thresholds for industrial structure upgrading and economic fluctuations, but there are no human capital or FDI thresholds. In the rationalization model of industrial structure, there is a nonlinear "U" relationship between environmental regulation and economic fluctuations when the proportion of scientific research expenditure is more than 1.35%. With the enhancement of environmental regulation, the economic fluctuation reduces first and then increases, and the corresponding inflection point value is 2.398% of the environmental regulation level. At the same time, the environmental regulation can indirectly reduce economic fluctuations by pushing down the industrial structure upgrades. In the advanced model of industrial structure, there is a “U” relationship between environmental regulation and economic fluctuation when the proportion of scientific research expenditure is greater than 1.26%. With continuous enhancement of environmental regulation, the economic fluctuation reduces first and then increases. The corresponding inflection point value is 1.78% of the environmental regulation level, and environmental regulation can indirectly reduce economic fluctuations by promoting the industrial structure at the same time.

Subject Areas

Environmental regulation, Industrial structure upgrade, Economic fluctuation, Dynamic panel threshold

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