Analysis of the Effect of Environmental Regulation on Eco-Efficiency of Service Sector

Abstract

The green transformation of the service sector is crucial for promoting the construction of ecological civilization and boosting high-quality development. The aim of the relationship between environmental regulation and eco-efficiency is to explore the path of the green transformation of the service sector. Based on the provincial data in China from 2001~2019, this study investigated the effect of environmental regulation on the eco-efficiency of the service sector, concentrating on the influencing mechanism and threshold effect of environmental regulation on the eco-efficiency of the largest service sector in the Chinese economy. Applying the panel OLS model, mediating model, and threshold effect model. The main findings are as follows. First, environmental regulation is not beneficial for boosting the eco-efficiency of the service sector because of compliance costs. Second, environmental regulation can reduce the eco-efficiency of the service sector through service agglomeration. However, the effect of innovation compensation can hinder the negative influence of environmental regulation on the eco-efficiency of the service sector. Third, the inhibiting effect of environmental regulation disappears non-linearly with boosting economic development. Conversely, the positive influence of environmental regulation becomes negative, along with improving service agglomeration. At last, this study provided recommendations for the policymakers who hope to accelerate the green transformation of the service sector from the perspectives of strengthening technological innovation, reducing agglomeration, and establishing coordinated development mechanisms.