Environmental Regulation, Directed Technical Change, and Economic Growth: Theoretic Model and Evidence from China

Abstract

Can environmental regulation be used to promote directed technical change and economic growth simultaneously? We construct an endogenous economic growth model that includes environmental regulation, the extent of environmental pollution, and economic performance in a general equilibrium framework. We show that in the absence of government intervention, environmental pollution will not automatically disappear as economic growth increases. Furthermore, “threshold constraints” result from “path dependence” in the type of innovation; only when the rate of carbon tax and carbon reduction subsidy reaches a certain extent will individuals (or producers) redirect technical change toward “clean” energy production technologies innovation and away from “dirty” energy production technologies. Our article also discloses the intrinsic principle and micromechanism of environmental regulation to promote economic growth and finds that strict environmental regulation will both significantly promote the evolving labor division in clean energy production technologies innovation and achieve the benefits of improved average labor productivity in the production sector and the market size of goods, so that the benefit exceeds the switching cost.

Induced Effect of Environmental Regulation on Green Innovation: Evidence from the Increasing-Block Pricing Scheme

“…Such ideas have been supported by studies on energy prices and environmental policy instruments, such as tax concessions and subsidies [ 8 , 34 ]. For example, Tang et al [ 35 ] claimed that only when the rate of carbon tax and carbon reduction subsidy reaches a certain extent, will individuals (or producers) redirect their technical change towards “clean” energy innovation. Greak and Heggeda [ 36 ] stated that subsidies to R&D are not as effective as carbon taxes, under the assumption of long validity.…”

Blessing or Curse? The Impacts of Non-Agricultural Part-Time Work of the Large Farmer Households on Agricultural Labor Productivity

“…In terms of the labor division and specialization, the non-agricultural part-time work of farmer households is conducive to optimizing the labor-force allocation (Nguyen et al, 2019) and then deepening the labor specialization for agricultural production. In addition, the yearly income from the non-agricultural part-time work motivates farmers to selectively purchase modern agricultural production machines (Qiu et al, 2020), or increase the fertilizer and pesticide expenditures (Ma et al, 2018), to improve the agricultural labor productivity in the roundabout production pattern (Xiang & Han, 2005;El Omari, 2017;Tang et al, 2019).…”

Could the Environmental Regulation Promote Green Innovation? Evidence From China

“…Strict but reasonable environmental regulatory policies, such as Pigovian taxes and pollution permits, can encourage producers to internalize external uneconomic behavior, encourage producers to actively participate in green innovation research and development activities, increase green product output, and generate "innovation compensation" effect to offset the impact of compliance costs (Porter and Vander, 1995). Later, many scholars conducted a series of explorations around Porter's hypothesis and believed that the greater the intensity of environmental regulation, the more conducive to driving the development of regional green innovation levels, and there is a positive linear correlation (Rubashkina, 2015;Santis, 2017;Tang et al, 2019;Deng et al, 2020). So, does environmental regulation have a significant positive or negative impact on green innovation?…”