How does inter-sectoral linkage affect the environmental performance of a transitioning region: Evidence frm the Yangtze River Economic Belt, China

Regarding the environmental effects of industrial restructuring, the changing types and shares of sectors attract more attention, while the role of industrial linkages is under-researched. The overlook of industrial linkages leads to the over-optimism about balancing the development-environment relationship by industrial restructuring. This study investigates how inter-sectoral linkages affect the environmental performance of a transition region. We argue that inter-sectoral linkages are conditioned by not only their techno-economic interdependencies but also their dependencies on geographical contexts. Thus, inter-sectoral linkages may affect environmental improvement via production linkages and local stickiness. We construct two proxies for them by the hypothetical extraction approach and co-occurrence analysis, respectively. Using the Yangtze River Economic Belt in China as a case, we apply a fixed-effect model to estimate their effects on environmental performance. Empirical results show that inter-sectoral linkage is a double-edged sword for environmental improvement. It can hinder environmental improvement, particularly in terms of local stickiness. Our results question the effectiveness of industrial selection policy for promoting sustainability transition. Instead, they support an industrial policy targeting regional integration and local capacity-building.