Can environmental regulation promote the coordinated development of economy and environment in China’s manufacturing industry?–A panel data analysis of 28 sub-sectors

Abstract Improving eco-efficiency of China’s manufacturing industry will be conducive to break the bottleneck of resources and environment constraints of industry development and further the coordinated development of economy and environment. This paper employs the panel data of 28 sub-sectors in China’s manufacturing industry during 2003–2013, divides these sub-sectors into three groups—the high, medium and low eco-efficiency industries according to the eco-efficiency level, and explores the effects of environmental regulation on technical innovation (“weak” Porter hypothesis) and eco-efficiency (“strong” Porter hypothesis) respectively. The results show that: (1) whether environmental regulation can promote the coordinated development of economy and environment in the manufacturing industry is contingent upon the reasonable level of environmental regulation. However, overall, the level of current environmental regulation is not yet sufficient to promote the improvement of eco-efficiency. (2) Industry heterogeneity exists in the effects of environmental regulation on technical innovation and eco-efficiency, that is, in the high and low eco-efficiency groups, the impact of environmental regulation on technical innovation is an inverted “U” type while that on eco-efficiency is an “U” type. (3) The impacts of environmental regulation on technical innovation and eco-efficiency in the medium eco-efficiency group are both “U” type, indicating that moderately enhancing environmental regulation can achieve the win-win situation of economic and environmental performance in this group. Lastly, we provide policy implications for different industries.