In alignment with China's strategic goals of building a Beautiful China and achieving high-quality regional development, implementing differentiated pollution control policies tailored to specific locations has become crucial for balancing economic growth and ecological protection. As a location-oriented environmental management tool, such regulation aims to implement targeted governance measures by delineating zones with varying control intensities. While its environmental benefits are widely recognized, debates persist regarding its economic costs and uneven impacts on corporate competitiveness—particularly the disproportionate effects across regions and industries that have drawn significant academic attention.

Professor Wu Wenjie and collaborators examined this issue through a quasi-natural experiment centered on China's "Two Control Zones" policy (targeting acid rain and sulfur dioxide pollution). By integrating micro-level enterprise data with geographic information, their study analyzes how location-based pollution regulation affects firm productivity and reveals the heterogeneity of these effects across regions and firms.

Key Findings:

1. Firm-Level Impacts:

• The policy significantly influenced productivity growth, with larger, initially more productive firms showing greater adaptability.

• Lower-productivity firms faced higher exit risks, suggesting market selection effects.

2. Regional Economic Effects:

• Areas with stronger industrial linkages exhibited more pronounced responses to regulation.

3. Adaptation Mechanisms:

• Firms adopted compliance strategies including coal reduction, product mix adjustments, and innovation investments.

• While these measures raised short-term transition costs and temporarily slowed productivity growth, they conferred long-term competitive advantages.

These findings elucidate how location-based environmental regulation reshapes industrial productivity patterns, offering empirical support for regionally tailored green development policies.

Publication Details:

• Journal: Journal of Environmental Economics and Management (February 2025, Online)

• Authors:

• Chen Ying: Assistant Professor, School of Economics, Xiamen University

• Wu Wenjie (Corresponding Author): Professor, School of Economics and Management, Wuhan University

• Yuan Yanwen: Assistant Professor, School of Management, Xi'an University of Architecture and Technology

• Funding: Supported by Major Projects of the National Social Science Fund and the National Natural Science Foundation of China.

Researcher Profile - Wu Wenjie：

• Position: Professor, Department of Economics, School of Economics and Management, Wuhan University

• Publication: The Geography of Pollution Regulation and Productivity

• Journal Link: https://doi.org/10.1016/j.jeem.2025.103134

Office of Scientific Research and Discipline Development
Edited by: Song Lan
Reviewed by: Liu Yanqing