The Impact of China's Pilot Carbon Ets on the Labor Income Share——Based on an Empirical Method of Combining Psm with Staggered Did

This study evaluates the impact of China’s pilot carbon ETS on the labor income share in a quasi-natural experimental setting. We apply the method of combining PSM with staggered difference-in-differences based on firm-level panel data from 2009 to 2019. To avoid negative weight and allow treatment effect heterogeneity for the calendar time and entry cohort, we use a new econometric estimator called the extended two-way fixed effects estimator. The estimated results show that China’s pilot carbon ETS significantly increases the labor income share. Further analysis indicates that the treatment effect across the calendar time leaps and bounds since 2017, but the coefficients are not obviously related to the entry cohort time when the firm is first treated. In addition, the estimation of the dynamic treatment effect shows that the policy impact noticeably increases with the length of exposure to the treatment. Moreover, the impact of the carbon ETS on the labor income share is stronger for firms with more R&D expenditure and R&D personnel. There are some differences among the four pilots in Beijing, Shenzhen, Shanghai, and Hubei. The influence in Shenzhen is the strongest, and those in Beijing and Shanghai are weaker. The influence in Hubei’s pilot is still positive but insignificant. These findings provide initial empirical evidence about the factor income distribution effects of market-based climate policy