Market Segmentation and Haze Pollution in Yangtze River Delta Urban Agglomeration of China

Abstract

Haze pollution not only has negative impact on public health and air quality, but also has restricted China’s industrial upgrading and high-quality development, and Chinese urban agglomerations are one of the areas hardest hit of haze pollution. In the process of China’s economic transformation, local governments will adopt local protectionism, leading to market segmentation. This is a phenomenon that refers to the distortion of resource allocation by local governments for the sake of vested interests and the existence of segmentation in commodity markets. This behavior is considered to be one of the important factors causing haze pollution. As Yangtze River Delta urban agglomerations are considered to be one of the earliest, fastest growing, and most mature for market integration in China, there is a lack of empirical testing on the impact of market segmentation on haze pollution in this urban agglomeration. Based on urban panel data from the period of 1998–2018 and the market segmentation index calculated by the relative price method, we use the dynamic spatial Durbin model and generalized space two-stage least squares method to explore the effect of market segmentation in urban agglomeration on haze pollution; the results are as follows: (1) Market segmentation significantly exacerbates haze pollution, in other words, haze pollution will increase by 2.14% when market segmentation increases by 1%. (2) Cities with a high degree of market segmentation and high levels of haze pollution have the potential to reduce pollution through market integration in the future. (3) Market segmentation in surrounding regions also has a significant worsening effect on haze pollution in the region. The indirect effect of market segmentation is 3.67 times that direct effect, indicating that the spatial spillover effect of market segmentation on haze pollution is greater than its own impact. (4) Mechanism analysis finds that it will aggravate haze pollution by hindering economic scale, industrial structure, and technological progress when the degree of market segmentation is high.

Keywords

• market segmentation
• haze pollution
• dynamic spatial Durbin model
• the Yangtze River Delta urban agglomeration