The Effect of Environmental Regulation on Employment in China: Empirical Research Based on Individual-Level Data

Abstract

This paper argues that the scale effect and substitution effect in the labor demand for environmental regulations should not be ignored in the pursuit of environmental improvements. It is necessary to analyze the influential mechanism of environmental regulations on employment. Based on the pooled cross-section data combined by CHIP (Chinese Household Income Project) data and macro data at the city level, this paper investigates the impacts of environmental regulations on an individual’s employment probability in China. The results show that there exists a U-shaped relationship between environmental regulations and an individual’s employment probability. The employment effect on workers from different regions and industries or with different hukou (Household Registration System) is heterogeneous. Specifically, the regulations are more stringent in the east, more significant in secondary and tertiary industries, and stronger on urban workers’ employment. The findings are robust to alternative measures.