Green Governance, Technical Progress and Employment

Abstract

In the context of low-carbon economic transformation, achieving a win-win situation for corporate green governance and employment is currently a challenge for China’s development. While existing literature predominantly addresses the influencing factors on employment and the economic and environmental benefits of adopting green governance, limited attention is given to its social benefits, particularly its impact on employment. This paper addresses this gap by analyzing the influence of green governance on employment through the lenses of social identity theory and cost theory. Further, the paper builds a two-sector model including the polluting and non-polluting industry to verify the technical progress mechanism between green governance and employment. The model analysis suggests that, technical progress is an important channel connecting green governance and employment, and the technical progress mechanism varies between the heavy pollution industry and non-heavy pollution industry.

Empirically, utilizing firm-year financial and environmental data sourced from CSMAR and WIND databases, this study constructs a corporate green governance index employing the Janis-Fadner coefficient method. Total factor productivity is employed to gauge technical progress, with the DEA-Malmquist approach facilitating the decomposition of technical progress into technical and efficiency changes. Through OLS regression, the impact of green governance on employment is examined, with the mediating effect of technical progress tested.

Empirical findings indicate a significantly positive relationship between corporate green governance and employment, with technical progress mediating this association. The conclusion is still valid after the robust test by considering the endogeneity of the model and replacing key variables. We also find a divergence between the mechanism of green governance impacting employment for the heavy pollution industry and non-heavy pollution industry. Specifically, technical change shows a suppression effect in all sectors, while efficiency change has a positive mediating effect in the non-heavy pollution industry.

This study contributes to the literature on the following three aspects. Firstly, the study extends existing concerns of economic and environmental to social benefits of corporate green governance. Secondly, the study provides a theoretical explanation for the underlying mechanism of technical progress. Thirdly, the study examines the heterogeneous effects of green governance on employment between the heavy pollution industry and non-heavy pollution industry.

In conclusion, this paper sheds light on how corporate green governance promotes employment and its mechanism, and provides valuable implications for enterprises and policymakers to implement green governance and promote high-quality development.