The Nonlinear Impact of Environmental Regulations on Urban Employment: Evidence from the Yangtze River Economic Belt of China

Abstract

As an important policy tool for promoting green development, environmental regulation (ER) has exerted a profound impact on the employment sector. Using panel data from 106 prefecture-level and above cities in China’s Yangtze River Economic Belt (YREB) from 2011 to 2022, we examine the impact and mechanisms of ER on employment scale and structure. Empirical results reveal that the strengthening of ER has a significant inhibitory effect on employment growth, but a positive impact on the optimization of the employment structure. As regulatory intensity increases, the suppressive effect on employment scale diminishes, while structural optimization strengthens. Moreover, the effects vary across regions. The scale-inhibiting effect is more pronounced in the Upper-Middle Yangtze regions, in areas with initially low regulation intensity, and in large cities. Structural optimization is most significant in the Lower Yangtze regions and in small/medium-sized cities. We also find that ER indirectly changes employment through three channels: industrial structure upgrading (ISU), green innovation (GV), and foreign direct investment (FDI). Our findings underscore the necessity of balancing environmental stringency with social sustainability, and the conclusions of our study are applicable to policymakers in China and other economies.