A study of the impact of heterogeneous location change of enterprises on environmental regulation

Abstract

Abstract: In order to better explain the causes of the dilemma between investment inviting and environmental protection in backward or underdeveloped regions, an analysis was made under the FCVL model framework of the environmental policy, enterprise location change and internal transmission mechanism of environmental pollution, with location transfer activities of heterogeneous enterprises described in detail from a micro perspective. In addition, an analysis was also given regarding the formation of corresponding equilibrium locations and the explicit solution to pollution volume in the case of collaborative and non-collaborative environmental regulation policies, which provide theoretical support for further empirical research. The trade cost, which is a key factor in the regional transmission mechanism of environmental pollution, an analysis was made by means of GMM (Generalized Moment Method) of the dynamic panel data model of 38 industries in China′s industrial manufacturing during the 2010—2018 period. Studies have shown that the total capital size owned by enterprises has a direct positive impact on environmental regulation, and has an indirect impact on environmental regulation through the intermediate effects of the pollution volume per unit of product, consumer price index and total capital size. According to empirical studies, with a higher degree of trade freedom, non-collaborative environmental regulation will increase total pollution volume while collaborative environmental regulation will reduce total pollution volume.
Under the framework of the FCVL model with the inter-company vertical linkage between input and output, this paper, by establishing the theoretical model of corporate pollution and industrial agglomeration, explored the internal mechanism of environmental pollution and agglomeration and the impact of industrial agglomeration on the share of regional expenditure and environmental pollution volume with the hypothesis of corporate heterogeneity. According to the analysis in this paper, under the premise of industrial agglomeration and vertical linkage between enterprise input and output, there is no such a dilemma between investment inviting and environmental protection in backward or underdeveloped regions, but there appears a certain tendency of inter-regional "competition for growth", which put forward new requirements for the formulation of industrial relocation and regional coordination policies.
Based on studies in this paper, the conclusion of the FCVL model under corporate heterogeneity supports the role played by environmental regulation in environmental protection. The collaborative environmental regulation policy works better than the non-collaborative environmental regulation policy, which again, works significantly better than no environmental regulation. Therefore, from an overall economic perspective, the implementation of environmental protection policies based on regional cooperation is particularly important. Against the current context with frequent capital flows and the existence of vertical linkages between corporate intermediate inputs, the implementation of collaborative regulation policies can effectively reduce the circumvention of environmental regulation by polluting enterprises or industries and the appearance of "pollution havens". It is important to note that, in the case of a unified environmental regulation policy, attention should be paid to preventing local governments from twisting environmental regulation policies, particularly from impairing or not implementing environmental regulation policies by implicit or manipulative means.
Based on the conclusion of the study, it is obvious that for the overall economy, local protectionism measured by trade costs will result in lower overall expenditure and an increase in environmental pollution. Increased trade costs will lead to an increase in the intermediate consumption of products, as well as a hindrance to the functioning of agglomeration and scale economy, resulting in inefficient resource allocation. Therefore, the policy orientation is also obvious: to reduce the trade cost of a single domestic market to integrate the domestic market, increase industrial transfer and regional coordinated development, reduce trade costs from an institutional level, and provide institutional dividends for enterprise relocation and agglomeration through market integration. The enterprise relocation and agglomeration will further provide momentum and bonds for market integration. The interaction between the two makes market integration particularly important.

Key words: environmental regulation, FCVL model, location change, trade cost

Lai Junming, Ouyang Ju. A study of the impact of heterogeneous location change of enterprises on environmental regulation[J]. Science Research Management, 2021, 42(3): 61-70.

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