Carbon emissions regulation, input-output networks, and firm dynamics: The case of a low-carbon-zone pilot in China

Shi, Xiangyu and Wang, Chang (2024): Carbon emissions regulation, input-output networks, and firm dynamics: The case of a low-carbon-zone pilot in China.

Abstract

Input-output linkages among sectors and firms are largely overlooked when assessing regulatory policies. Using a carbon emissions regulation in China as an example, we find that the regulation facilitates the transition to green technologies and reduces entry and carbon emissions in the regulated sectors with large carbon emissions. We also find unintended spillovers via the input-output network, resulting in more entry and innovation in the downstream sectors; and less entry and innovation in the upstream sectors. These facts can be rationalized by a firm-dynamics model with input-output linkages. The results of quantitative exercises are much different when taking input-output linkages into account.

• Item Type: MPRA Paper
• Language: English
• Keywords: carbon emissions regulation; firm dynamics; innovation; input-output networks
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General; D - Microeconomics > D2 - Production and Organizations; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics

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