Does environmental regulation affect global value chain position in service sectors? Evidence from 41 major economies

Abstract

The increasing international division of production and stringent environmental policies coexist, which lets people focus more on the research on the relationship between environmental regulation and the global value chain (GVC). Based on the characteristics of service sectors, this study proposes hypotheses of how environmental regulation affects GVC position in service sectors and empirically investigates it by using panel data of the GVC position index in service sectors and the environmental performance index (EPI) from selected 41 major economies during 2006–2014. Our empirical study found the following: first, environmental regulation has significantly promoted the increase of GVC position in service sectors, which obviously can verify the validity of the Porter hypothesis. Second, environmental health has a greater effect on GVC position in service sectors than on ecosystem vitality. Third, the influence of environmental regulation on GVC position in service sectors is heterogeneous under different quantiles. The higher per capita income, the more stringent their environmental regulation and the stronger their impact on GVC position in service sectors. In general, this study will contribute to a better understanding of the relationship between environmental regulation and GVC.