Research on the Policy Effect and Mechanism of Central Environmental Protection Supervision System on Industrial Structure Upgrading – Empirical Evidence from 283 Prefecture-Level Cities in China

Abstract

The industrial structure upgrading (ISU) plays an important role not only as an important issue in China's economic structure transformation, but also as a key factor in terms of implementing a "win-win" situation between economic growth and environmental protection. The full implementation of the central environmental protection supervision system’s (CEPSS) function in fostering the modernization of China's industrial structure is crucial for the country's economic restructuring and the development of eco-civilization. By applying the double difference (DID) model, this paper has analyzed the policy effect and impact mechanism of the CEPSS on the ISU, in order to explore the effectiveness of the CEPSS on ISU. The research results based on the panel data integrated from 283 prefecture-level cities in China from 2006 to 2019 reveal that: (1) the CEPSS has significantly improved the ISU; (2) the CEPSS was able to act on the ISU through three paths: local government environmental governance motivation, innovation level, and foreign direct investment; (3) The heterogeneity analysis reveals that the promotion function of the CEPSS on the ISU chiefly exists in large cities, super cities, non-resource-based cities and cities in eastern and central China. The research results shall provide theoretical support and policy suggestions for rationally optimizing the CEPSS and promoting the ISU.