Create or squeeze out? The effect of environmental protection tax on labor demand and labor demand transfer: evidence from China

This paper uses panel data from 286 cities across 30 provinces in China to construct an intensity difference-in-differences model, examining the impact of the environmental protection tax on total labor demand and labor transfer. Empirical research demonstrates that the environmental protection tax significantly boosts total labor demand. Robustness tests confirm the validity of these findings. The effect of the environmental protection tax on labor demand varies significantly across industries, industrial structures, and regions, leading to labor transfers within these domains. Environmental protection tax increases labor demand in science and technology, water and environmental, health and social insurance industries, the tertiary industry, and the western regions. Conversely, it leads to a substantial reduction in labor demand within industries such as mining, manufacturing, electricity and gas industries, and the secondary industry. The labor transfer effect across industries, industrial structures, and regions is reflected in increased technological innovation input, industrial structure optimization and upgrading, and industrial regional transfer. Further analysis suggests that the development of the environmental protection tax can effectively promote economic growth and achieve pollution reduction. Based on these findings, the paper proposes policy recommendations to improve the environmental protection tax policy and foster labor growth.