The impact of industrial agglomeration on industrial pollutant emission: evidence from China under New Normal

The purpose of this study is to analyze the environmental pollution effects elicited by industrial agglomeration and to devise necessary changes before and after China going into the New Normal, a contemporary phase of less rapid but more sustainable economic development. An empirical model is constructed based on the Copeland-Taylor model, and empirical research is conducted using statistical panel data derived from 285 Chinese cities between 2003 and 2014. To study the relationship between industrial agglomeration and industrial pollutant emission both before and after the 'New Normal,' the sample data are divided into two time periods: 2003-2008 and 2009-2014. Estimated results are as follows. First, industrial agglomeration exacerbates industrial pollution levels overall although the negative environmental effect of industrial agglomeration is weakened following China's entry into the New Normal phase of economy. Second, both the interaction term of industrial agglomeration and foreign direct investment (FDI) and the interaction term of industrial agglomeration and environmental regulation are negatively related to industrial agglomeration. These findings indicate that FDI and environmental regulation can indirectly reduce industrial pollutant emissions by way of industrial agglomeration.