Labor allocation: How environmental regulation promotes industrial structure.

Using the panel data of China from 2007 to 2016, this paper explores the relationship between environmental regulation and industrial structure upgrading. The results show that environmental regulation has a causally positive impact on the upgrading of industrial structure. To explain the positive causal effect of environmental regulation, we adopt the mediation effect method and then confirm that allocated labor rather than technological innovation is a significant channel by which such regulation affects industrial structure upgrading. Ultimately, this paper complements the existing economic literature by justifying that labor allocation is a key mechanism to upgrade industrial structure in China. [ABSTRACT FROM AUTHOR]