Environmental Policies and Wage Inequality: Evidence From China's Low‐Carbon City Policy

ABSTRACT

This study examines the effects of China's low‐carbon city policy (LCCP) on wage inequality between executives and rank‐and‐file employees. Using a difference‐in‐differences approach with data from A‐share listed firms (2007–2023), we find that the LCCP reduces wage inequality mainly by increasing rank‐and‐file wages. The mechanism evidence is consistent with workforce restructuring, marked by more skilled and fewer unskilled workers. Additional results indicate that the policy stimulates green investment and raises compliance costs, which are consistent with increased demand for skilled labor. The impacts vary across firms and cities.