Environmental regulation, green technological innovation and firm exports: evidence from air pollution prevention and control action plan

Promulgated in 2013, the Air Pollution Prevention and Control Action Plan is one of the toughest environmental regulations in Chinese history. It internalizes pollution as a production cost and affects export benefits. This paper applies the difference-in-difference model to explore the effect of environmental regulation on firm exports based on data from Chinese A-share listed firms during 2008-2018. Results shown that the Air Pollution Prevention and Control Action Plan generated a growth of 1.15% in firm exports with immediate influence, and a set of robustness tests confirmed the credibility. Regarding its effectiveness in promoting exports based on internal firm characteristics and external market factors, environmental regulation performed better in heavily polluting, state-owned, large-scale and high-export-value firms, and a high level of marketization and information disclosure stimulated this positive effect. Further analysis shows that exporting firms in responded to environmental regulation by conducting green technological innovation, which was inspired by external pressure, and "investment-investment opportunity" sensitivity model confirmed that resource allocation optimization is another significant response channel. Our discussion has important policy implications for environmental regulation in ensuring export benefits while controlling pollution.