Does the Porter hypothesis hold in China? evidence from the “2+26” regional air pollution treatment policy

• Published in: Environment and development economics 2024-08, Vol.29 (4), p.319-337
• Main Authors: Luo, Weijie, Xiang, Di, Zhang, Xiaoming
• Format: Article
• Language: English
• Subjects: Air pollution; Air quality; Emissions; Environmental impact; Environmental protection; Environmental regulations; Expenditures; Hypotheses; Impact analysis; Investments; Manufacturing; Outdoor air quality; Policy making; Pollutants; Pollution control; Productivity; Profit maximization; Quality control; R&D; Regional analysis; Regional development; Regions; Regulation; Research & development
• ISSN: 1355-770X; 1469-4395
• DOI: 10.1017/S1355770X24000093

This study analyzed the impact of environmental regulation, specifically the “2+26” regional strategy for air quality improvement, on corporate research and development (R&D) investment in China. We developed a theoretical model based on the argument that R&D investment rises with regulation intensity. Using 2010–2019 data from China's listed companies located in the Beijing-Tianjin-Hebei region and its surrounding areas, we treated the $2+26$ policy as a quasi-natural experiment and adopted a difference-in-differences approach to explore its effect on firm R&D input. A positive association was observed between firm R&D intensity and the $2+26$ strategy's implementation in major polluting industries. Our results provide in-depth insights into the $2+26$ strategy's economic consequences, which are potentially of interest to both scholars and policymakers.