China Urban Low-Carbon Constraint and Heterogeneous Enterprise Location Choice

Abstract

This study investigates the impact of low-carbon constraints on the location choices of heterogeneous firms. Based on data from 282 prefecture-level cities in China and 293,800 newly estabilished firms, this paper empirically analyzes the impact of urban low-carbon constraints on firms' location choices. Using a two-way fixed effect model and instrumental variables, a low-carbon location choice effect was found, indicating that the stronger the intensity of a city’s low-carbon constraints, the more willing high-productivity firms are to enter. Urban low-carbon constraints can prompt enterprises to engage in technological innovation, attracting high-productivity enterprises while inhibiting the entry of low-productivity enterprises. Additionally, low-carbon constraints enhance the market potential of cities and reduce labor costs, attracting various types of enterprises. A heterogeneity analysis reveals that urban low-carbon constraints are more attractive to firms in small and super cities in terms of city size, regular prefecture-level cities in terms of hierarchy, and energy- and technology-intensive businesses in terms of industry. These findings provide a theoretical basis and practical reference for the formulation of urban low-carbon constraint policies.