Impacts of industrial agglomeration on pollution and ecological efficiency-A spatial econometric analysis based on a big panel dataset of China’s 259 cities

Abstract

In theory, the environmental positive externality of industrial agglomeration should be larger than its negative externality. However, from China’s reality, regions with a higher degree of industrial agglomeration often face various environmental problems, which raises the question whether industrial agglomeration helps or inhibits environmental quality improvement. Based on a big panel dataset of 259 cities from 2007 to 2016, this paper empirically tests the impacts of industrial agglomeration on pollution and ecological efficiency as well as the multidimensional urban heterogeneity using the spatial Durbin model. Moreover, it investigates the pollution reduction and green development effects by the common agglomeration of industry and services. We found that industrial agglomeration, pollution, and ecological efficiency have significant spatial spillover effects, with the agglomeration presenting a significant inverted U-shaped relationship with discharged wastewater, sulfur dioxide emission, and soot (dust) emission, and a significant U-shaped relationship with ecological efficiency. These results indicate that when the agglomeration level exceeds an inflection point, the agglomeration can generate pollution reduction and ecological efficiency improvement effects. Furthermore, the impacts of industrial agglomeration on pollution and ecological efficiency demonstrate obvious urban heterogeneity. In general, the "agglomeration inflection point" of eastern, large-sized, and major cities for environmental protection is smaller than that of central and western, medium-and small-sized, and non-major cities for environmental protection, respectively. In addition, the agglomeration among complementary and related industries can generate a noticeable pollution reduction effect, especially the common agglomeration of industry and producer services can effectively improve the coordination of economy, resources, and environment.