Political Economy of Mitigating Carbon Emissions with Mild Constraints: An Empirical Study on Employment Based on Low-Carbon City Pilot Policy

The interaction between socioeconomic disparities and environmental degradation, which is highly pertinent to the issue of climate change, has garnered significant scholarly attention globally. Despite the critical importance of climate change in political economy, research into labour markets and environmental policies remains limited in the current literature. Therefore, the present study discusses the implementation of China's low-carbon city pilot policy (LCCPP) as an exogenous policy shock. Utilizing A-share data from listed companies on the Shanghai and Shenzhen stock exchanges spanning the period 2007-2020, we employ a multiperiod difference-in-differences model to scrutinize the influence and mechanisms of LCCPP on employment. Our study reveals a significant increase in employment levels within pilot cities due to LCCPP. The findings remain stable even after the results are subjected to a battery of robustness tests. Mechanistic analysis suggests that the policy substantially increases employment through the scale effect and factor substitution effect. Heterogeneous results demonstrate the policy's substantial promotion of employment levels in pilot cities across state-owned enterprises,1 the first and second industrial sectors and low-carbon industry enterprises. These research findings support steering China's economic development towards a low-carbon, environmentally sustainable growth transformation. Furthermore, policymakers should encourage the LCCPP to stimulate employment while addressing socioeconomic disparities and environmental concerns simultaneously in political economy.