Like snow in the sun: Government's environmental attention and the withdrawal of polluting firms

Abstract

Based on the heterogeneous firm theory, this study uses text analysis and microeconometric methods such as a two-way fixed-effect model, a subsample regression and an interactive term regression to investigate the influence of local government's environmental attention on the withdrawal of polluting firms. Research shows that such attention can accelerate the latter by increasing the severity of environmental regulations, reducing government subsidies and increasing technological innovation. Additionally, the influence of such attention on the exit of polluting firms weakens as market concentration, official corruption and fiscal decentralization increase. This study introduces government's environmental attention and explores its internal mechanisms and external factors, thus improving the framework of environmental governance and helping to understand the “black box” of environmental policy.