Regulation through revelation: The effect of pollution monitoring on labour demand

For any environmental regulation to be effective it requires adequate monitoring and enforcement. This paper aims at studying the causal effects of a real-time pollution monitoring programme on the level of firms’ employment. Employing entropy balancing on a unique firm-level dataset, we find that the enhanced regulatory monitoring has a significant and robust positive impact on the employment of monitored firms. Further investigations suggest that positive employment effects are primarily driven by changes in capital investment and subsequent output increase. Our results are independent from ownership and other energy policies during the same period. The study sheds new light into the benefits of regulatory monitoring and enforcement activities.