Does industrial agglomeration facilitate environmental performance: New evidence from urban China?

This paper presents new evidence on the impact of industrial agglomeration on environmental performance with a sample of prefectural-cities in China. When environmental performance is represented by pollution intensity, the impacts of industrial agglomeration on pollution intensity in terms of sulfur dioxide and soot show the heterogeneous pattern. The results support the existence of a non-linear pattern between agglomeration and emission intensity of sulfur dioxide, whereas the non-linear model could not hold for the emission intensity of soot. However, when we measure environmental performance with environmental efficiency estimated by a data envelopment analysis approach, it documents a U-shape relationship between industrial agglomeration and environmental efficiency. Specifically, environmental efficiency deteriorates in the early stage of industrial agglomeration and then improves as local industrial agglomeration proceeds. Different estimation strategies provide consistent evidence to verify such U-shape pattern.