Performance Evaluation of Economic Relocation Effect for Environmental Non-Governmental Organizations: Evidence from China

Abstract

In this article, an economic natural experiment in China is analyzed and the performance evaluation of the economic relocation effect of informal environmental regulations imposed through the channel of environmental nongovernmental organizations (ENGOs) is suggested. ENGOs are found to have a significantly negative impact on the overall economic location quotient of six major polluting industries. The economic relocation effect from ENGOs exhibits industrial and regional heterogeneity, as the effect is stronger among easy-to-relocate industries and in market-oriented areas. The underlying mechanism is the ENGOs, as informal environmental regulations could motivate firms to enhance their investment in environmental governance, ultimately crowding out these economically polluting industries.