Spatial Effects of Air Pollution on the Siting of Enterprises: Evidence from China

The siting of enterprises is important for enterprises to formulate business objectives and business strategies, both of which are crucial to the development of enterprises in the future. Although there exists an irrefutable fact that the increasingly serious environmental problems are affecting the behaviors of enterprises, how air pollution affects the siting of enterprises has received little academic attention. Therefore, using the dataset of Chinese prefecture-level cities from 2014 to 2020, this paper employs the Spatial Durbin Model to investigate the direct and spatial spillover effects of air pollution on the site selection of enterprises. In addition, this paper also establishes a mediation effect model to explore the impact mechanism of air pollution on the site selection of enterprises. The empirical results show that air pollution exerts a negative impact on both the local and spatially related regions' enterprises' site selection, and the above conclusion is reinforced through a series of robustness checks. The heterogeneity analysis demonstrates that air pollution has a greater inhibitory effect on the siting of low-cleaning enterprises and small-scale enterprises for the local and adjacent regions. The mechanism analysis results indicate that air pollution inhibits the siting of enterprises by reducing the local labor endowment and market scale. Our study enriches the relevant theory of air pollution and enterprises' location nexus, and it also provides an empirical basis for the Chinese government to formulate policies related to air governance and the siting of enterprises.