Environmental regulation and tourism industry development: evidence from China

Tourism is a large, environment-dependent global industry. As an important policy tool for environmental protection, environmental regulation plays a significant role in development of the tourism industry. Using the panel data of 284 prefecture-level cities in China from 2004 to 2018, this paper innovatively analyzes the impact mechanism of environmental regulation on China's tourism development from the perspective of the integration of institutional and environmental economics. At the same time, this paper uses the instrumental variable two-stage least squares method (IV-2SLS) to solve the endogeneity problem of environmental regulation and China's tourism development, which makes the research conclusions more robust. The main results were as follows: (1) environmental regulation significantly promoted the development of the tourism industry. Specifically, tourist arrival (TA) and tourism revenue (TR) increased 8.79% and 8.64%, respectively, when the intensity of environmental regulation increased by 1%. This effect was still robust after applying a series of tests; (2) the impact of environmental regulation on the development of the tourism industry was heterogeneous for three aspects: the domestic and inbound tourism market, urban type, and urban location; (3) environmental regulation contributed to China's tourism industry development through industrial structure upgrading, technological innovation, and urban image promotion. Our findings offer valuable insight for the concerned authority and tourism sector to understand the positive role of environmental regulation in promoting high-quality development of the tourism industry by corresponding policy-making, industrial structure upgrading, technological innovation, and urban reputation building.