The Regionally Heterogeneous Impact of China’s Environmental Regulation on the Transformation and Upgrading of Its Industrial Structure

Abstract

Approaches to promoting the transformation and upgrading of China’s industrial structure represent an important issue in high-quality economic development. The upgrading of industrial structures is beneficial not only for environmental protection but also for sustainable economic development. This article first tests the correlation between environmental regulation and the transformation and upgrading of industrial structure through an impulse response function and then uses provincial panel data to analyze the regionally heterogeneous impact of environmental regulation on industrial structure upgrading. The research results indicate that: (1) the presented impulse response graph indicates that environmental regulation shocks have a significant impact on the rationalization and upgrading of industrial structure, and subsequent variance decomposition indicates that environmental regulation has a strong explanatory power on the transformation and upgrading of industrial structure; (2) overall, strengthening the level of environmental regulation is not conducive to the rationalization of industrial structure (RIS), but a strong level of environmental regulation can significantly promote the upgrading of industrial structure (UIS); and (3) at the regional level, there is significant regional heterogeneity in the impact of environmental regulation on the transformation and upgrading of industrial structure in different regions. Environmental regulation can promote UIS in China’s eastern and western regions, but it is not conducive to RIS. Environmental regulation can promote RIS in China’s central region, but it has a negative impact on UIS. The conclusion of this article provides inspiration for sustainable economic development.