The Impact and Mechanism of Government Environmental Policy Innovation on Industrial Agglomeration: An Empirical Study Based on a Quasi-Natural Experiment of the River Chief System Policy in the Yangtze River Economic Belt

Abstract

The Yangtze River Economic Belt pioneered the implementation of the River Chief System Policy (RCSP), where the government takes comprehensive responsibility for the water environment of the river basin to address water pollution issues. This policy has been promoted nationwide as a successful model of environmental governance. However, what impact does the RCSP implementation have on economic agglomeration, an important mode of economic growth? How does it exert this influence? Based on the implementation of the RCSP, this study establishes a quasi-natural experiment. Theoretical analysis is conducted using the Footloose Entrepreneur (FE) model, and empirical tests are performed using the difference-in-differences (DID) method and the mediation effect model. Additionally, robustness checks are conducted from multiple perspectives. Empirical results indicate that the RCSP significantly inhibits industrial agglomeration in the Yangtze River Economic Belt. This influence operates through three mediating mechanisms: industrial wastewater discharge, green technological innovation, and foreign direct investment. As a targeted water environmental regulation, the mediating mechanism of reducing the comprehensive environmental pollution index is not significant. The study also reveals heterogeneity in the spatial effects of the RCSP's inhibitory impact on industrial agglomeration, with stronger effects observed in regions with higher levels of marketization.