Does environmental regulation affect labor demand in China? Evidence from the textile printing and dyeing industry

Developing countries, including China, are just beginning to figure out how to balance economic development with the desire to address numerous severe environmental problems. In this paper, we use two enterprise-level data sets – China's Environmental Statistics Database and China's Industrial Enterprise Database – to estimate the impact of a more stringent wastewater discharge standard imposed on all the textile printing and dyeing enterprises in the Lake Tai, Jiangsu region, on labor demand. We find that enterprises which face this new more stringent standard decreased labor demand by approximately 7%. Furthermore, we find that the new standard had heterogeneous impacts on different types of enterprises. For example, our results indicate that the more stringent discharge standard reduced employment in domestically-owned private enterprises by 7.4%, but had little or no impact on state-owned or foreign-owned enterprises.