The Location Choice and Survival of Polluting Firms under Environmental Regulation in Urban Agglomerations of China

Abstract

There are few studies discussing the relationship between the increasing intensity of environmental regulation in the central cities of urban agglomerations, which is the main method used to solve the problem of regional environmental pollution, with the survival status of polluting firms in different spatial locations. In order to more clearly describe the evolution trend of the spatial distribution of polluting firms and coordinate inter-city environmental regulation policies in a more targeted manner, we examine the impact of polluting firms’ location choice on their survival under the central–periphery spatial structure in national-level urban agglomerations from 1998 to 2013 with the accelerated failure time (AFT) model and Cox proportional hazards (Cox PH) model and using matching data of the Chinese Industrial Enterprise Database and the Chinese Industrial Enterprise Pollution Emission Database. The results find that (1) under the influence of central cities’ environmental regulations, there is likely to be an inverted U-shaped relationship between the survival of polluting firms and their spatial distance from the central cities; (2) the inverted U-shaped relationship is the motivation of the interaction between environmental regulation and market potential, which means increases in the environmental regulation intensity in the central cities of the urban agglomeration will have a negative effect on the survival of polluting firms, and the central cities’ market potential will partially offset the negative impact; (3) the inverted U-shaped relationship is more significant for private firms, and it does not necessarily exist for new entrants. The above results help to provide important policy inspiration for promoting the joint prevention and control mechanism for pollution in urban agglomerations and coordinate the effects of environmental regulation and economic transformation policies between central and peripheral cities.