| Summary/Abstract |
Accurately recognizing the impact and mechanism of PM2.5 on firms is essential for China to achieve both the reduction of PM2.5 and economic growth. Based on the differing levels of PM2.5 concentration between both sides of the 800 mm isoline, we construct a quasi-natural experiment to investigate the impact of PM2.5 on firm evolution and regional economic efficiency. We further evaluate the role of government governance in achieving both PM2.5 reduction and regional economic efficiency improvements simultaneously. Results indicate that M2.5 disturb the process of firm evolution and influences regional economic efficiency through different effects. More importantly, the results show that in regions with strong governance, reducing PM2.5 could improve macroeconomic efficiency without hampering economic growth. In contrast, regions with weak governance tend to experience an increase in PM2.5 severity as economic growth advances. The evidence presented in this paper on the relationship between PM2.5 and economic development provides a new perspective to formulate policies for policymakers.
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