Does low-carbon transition shock employment? Insights from the low-carbon city pilot in China

This paper explores the impact of the low-carbon transition on the labor market by employing the implementation of low-carbon city pilot (LCCP) in China. We regard the LCCP as a quasi-natural experiment and utilize a dataset of 289 cities spanning from 2000 to 2019. Through the application of the time-varying difference-in-differences (DID) method, we find that the LCCP plays a positive role in employment enhancement. We document that the LCCP creates new jobs via promoting industrial transition, stimulating entrepreneurship, and elevating innovation. The positive effect of the LCCP on employment exhibits prior to the industrial intensive areas and the old industrial zones, the traditional heavy industry and emerging service sector, and cities with non-resource type, high-carbon emission, high-energy consumption, and low-income. Additionally, the employment in cities with younger major and high perception of thermal power benefit more from the LCCP. The findings further reveal that the welfare of the labor force gains through this low-carbon transition with both salary growth and income disparities reduction inside the pilot city. Our study sheds light on the welfare benefits and mechanism of the low-carbon transition and the determinants of employment.