Environmental pollution, environmental regulation, and labor income share

Liu, Yulin; Wang, Jun

Environmental pollution, environmental regulation, and labor income share

2020

Liu, Yulin | Wang, Jun

China has maintained great economic growth in the past and reached the status of a middle-income country. Meanwhile, the relationships among environmental pollution, environmental regulation, and economic growth have attracted wide attention. In addition, some studies have shown that economic growth is not balanced in the division of income between labor and capital, and this has become one of the most important issues in China. The conflict over the environment and income distribution is supposed to cause social welfare loss; therefore, we want to examine the impact of environmental pollution and environmental governance on labor income share. Our empirical results show that the relationship between environmental pollution and share of labor income is positive at the present stage. However, the relationship is not linear but rather an inverted-U shape in the long run. In addition, we tested the effects of environmental regulation on labor income share and found an inverted-U-shaped relationship. Although growing concern about environmental pollution adds to the pressure on the government, our statistical results suggest that there is no perfect way to resolve environmental problems. Additionally, labor unions are expected to play a different role in income distribution.

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