How does the industry mobility affect pollution industry transfer in China: Empirical test on Pollution Haven Hypothesis and Porter Hypothesis

Abstract

Abstract Pollution Haven hypothesis and Porter hypothesis provide two different behavioral strategies for pollution industries under stringent environmental regulations, which make a clear line between the two hypotheses in the previous literature. This paper studies the pollution industry transfer in China from the perspective of industry mobility, and proves that the transfer of pollution industries under environmental regulations is the comprehensive effect of “Pollution Haven” and “Innovation Compensation” by using Chinese provincial-level data from 2000 to 2015. The empirical results find that strongly mobile pollution industries have tended to transfer directly to the areas with loose regulations, but “Innovation Compensation” effect is not significant, leading to the pollution industries transferring out; the weakly mobile pollution industries have not shown the “Pollution Heaven” effect, environmental regulations will stimulate innovation and increase industry output through the mechanism of “Innovation Compensation”, which increases the regional proportion of pollution industries output. In short, we believe this study can provide a new perspective for explaining the current pollution industry transfer in China and help for more precise and reasonable environmental policies.