Based on the "two control zones" policy, this paper selects the panel data of Chinese prefecture-level cities and national patent data from 1994 to 2005, and establishes a DID model to explore the impact of environmental regulation on regional industrial transformation and upgrading from the city level. It is found that environmental regulation significantly promotes the transformation and upgrading of regional industries, and this conclusion is consistent in a series of robustness tests. Further study shows that the policy effect of environmental regulation has regional heterogeneity, that is, it significantly promotes the industrial transformation and upgrading in the eastern and central regions, but has no significant impact on the western and northeastern regions. Meanwhile, the mechanism study finds that environmental regulation promotes the transformation and upgrading of regional industries through technological innovation rather than capital investment.

Jiajun Guo, Juan Liang. Environmental Regulation and Regional Industrial Transformation and Upgrading: A DID Test Based on the "Two Control Zones" Policy. Academic Journal of Business & Management (2023) Vol. 5, Issue 9: 110-115. https://doi.org/10.25236/AJBM.2023.050917.

[1] Millime D. L., R. Santanu and A. Sengupta. (2009) Environmental Regulations and Economic Activity: Influence on Market Structure. Annual Review of Resource Economics,1(1):99-118.

[2] Solarin S. A., U. Al-Mulali I. Musah et al. (2017) Investigating the Pollution Haven Hypothesis in Ghana: An Empirical Investigation. Energy, 124, 706-719.

[3] Ramanathan R., Q. L. He B. Andrew, et al. (2017) Environmental Regulations, Innovation and Firm Performance: A Revisit of the Porter Hy-pothesis. Journal of Cleaner Production, 155(2):79-92.

[4] Li H., & Zou Q. (2018). Environmental regulations, resource endowments and urban industry transformation: comparative analysis of resource-based and non-resource-based cities. Econ. Res. J, 53(11), 182-198.

[5] Xu D. (2008). A theoretical explanation and verification of the determination and measurement of industrial structure upgrading form. Financial Research, (01), 46-9. 

[6] Yuan Y. J., & Xie R. H. (2014). Research on the effect of environmental regulation to industrial restructuring—empirical test based on provincial panel data of China. China Industrial Economics, 8, 57-69. 

[7] Yu Y. Z., Sun P. B., & Xuan Y. (2020). Do constraints on local governments’ environmental targets affect industrial transformation and upgrading. J. Econ. Res, 55, 57-72.