Environmental Regulations, Directed Technical Change and Vertical Division of Value Chain

This paper briefly reviews the economic literature on environmental regulation, technological innovation and vertical division of labor of value chain in the past decade. We first use a stylized growth model to analyze the channels and results of environmental regulations and the technological innovation they brought by. Then, we consider the impact of technological innovation brought by two forms of environmental regulation on the position of economic agents in the value chain. The results show that energy efficiency innovation brought by intensive environmental regulation has a more significant impact on economic performance, while product innovation brought by extended environmental regulation has a stronger promotion effect on the position of economic agents in the value chain. Available empirical evidence supports our results. Finally, we conclude with the goals that policies should nail in specific situations and the likely impact of different policies