Local development challenge in lagging-behind areas: insights from new & evolutionary economic geography

Lagging-behind regions, as an example of the failure of convergence in a country, has attracted the attention of many researchers who are attempting to adopt applicable policies and strategies to overcome the problem of low growth paths. The present study focuses on the policy proposals in the context of new economic geography and evolutionary economic geography for lagging-behind areas. Industrial agglomeration, as an essential element of the new economic geography, has restricted the potential for policy-making in lagging-behind regions. Creating regional advantages, as a policy in evolutionary economic geography, has provided diversified policy options for lagging-behind regions. However, this approach faces multi-level challenges in lagging-behind regions, including the lack of critical mass about low diversity and the gap in the knowledge base between lagging-behind and affluent areas. Therefore, if this policy is to be the basis for creating regional objectives, it should provide a structure for simulating external knowledge links and distinguishing the nature of the various related industries.

The impact of environmental regulations on the location choice of newly built polluting firms: based on the perspective of new economic geography

Based on the unique micro-data of newly built polluting firms for the period of 2009-2018, this paper adopts the conditional logit model to empirically evaluate the impact of environmental regulations on the location choice of polluting firms. Moreover, we extend the theoretical model by considering that the environment regulations not only influence the pollution cost but also the level of technological innovation and labor cost. The empirical results show that polluting firms tend to flow into areas with stringent environmental regulations, which supports the Porter hypothesis, but the effect of environmental regulations have a divergent impact on heavily polluting firms. Heterogeneous analysis indicates that environmental regulations have shown a positive impact on the location choice of private and foreign-funded firms but no significant impact on that of state-owned firms; the impact of environmental regulation is consistent with pollution haven hypothesis for firms in the central region but is in line with Porter hypothesis for firms in other regions. Meanwhile, the probability of air polluting firms entering areas with stricter environmental regulations is higher than that of water-polluting ones. Finally, this paper further empirically tests the conduction mechanism, that is, environmental regulations can affect the location choice of polluting firms by affecting the regional technological innovation capabilities and labor cost.