Aggregate Effect and Structural Effect of Environmental Policy Differences in China

摘要

In this paper, we set a two region two sector two factor model under a new economic geography (NEG) framework, and in this model, the manufacturing sector is divided into two industries, high pollution and low pollution industries. We discussed effects of environmental policy differences on the regional distribution of the manufacturing sector and structural change of industries in each region. We found that on one hand, the structural changes of industries are very sensitive to the environmental policy differences, while on the other hand, the regional distribution of the manufacturing sector is not as sensitive, which provided a reasonable explanation for China's "Pollution moving westward, production moving eastward" phenomenon. And we also found that it is improper to appeal manufacturing firms by relaxing the environmental policy, even regardless of the externality arising from environmental pollution. It not only attracts the "dirty industry", but also repels the "clean industry", and almost has no effect on share of manufacturing output.