Does industrial relocation alleviate environmental pollution? A mathematical economics analysis

Industrial relocation and its environmental impact attract widespread attention. We incorporated environmental elements into the decision-making framework of industrial relocation and developed a mathematical economics model. With this model, we investigated the impact of environmental regulation on industrial relocation; we also compared the environmental impact after relocation with that before relocation. We found that regulation can affect relocation, but prerequisites exist. Some factors such as pollutant generation factor, pollutant treatment cost factor, and relocation cost are indispensable components of the prerequisites. We also found that impacts of regulation on relocations of pollution-intensive industries (PIIs) and clean industries are different, and pollutant generation factor and relocation cost are two critical factors leading to this difference. This result indicates that environmental regulation does not necessarily lead to a relocation of PIIs. Total amount and intensity of pollutant emissions increase after relocation, and the extent of increase is positively correlated with the regulation in the home country and negatively correlated with that in the host country. This result reveals that industrial relocation alleviates home country’s environmental pollution in the sacrifice of host country’s environment through emissions leakage. This research yields essential considerations in policy making of industrial relocation.