1. Introduction
Environmental inequality, especially between regions within countries, has become an important global environmental issue [
1]. Although China’s overall ecological environment has improved, the structural, root, and trend pressures on ecological environmental protection have not been fundamentally alleviated. The construction of an ecological civilization is still in a critical period of overlapping pressures and heavy loads. As the limited environmental regulatory resources are mainly concentrated in urban areas, urban–rural environment inequality (hereinafter referred to as UUEI) has become a typical problem in the structural dimension of ecological environmental protection in China [
2]. This inequality not only forms a mutually reinforcing vicious cycle with environmental depletion [
1] but also damages the physical health of residents in low-income areas and aggravates preexisting income inequality and can lead rural areas to fall into the “environmental poverty trap” [
3,
4], which affects the sustainable economic and social development of rural areas in China [
5]. Therefore, verifying the factual characteristics of UUEI and exploring potential ways to alleviate UUEI are of great significance for the government to grasp the full picture of environmental inequality, alleviate the structural problems of ecological and environmental protection, and therefore realize sustainable development.
Although UUEI is an important component of environmental inequality, the existing literature on UUEI and its alleviation strategies is still in its infancy. Existing studies on environmental inequality mainly focused on the measurement [
6] of intergroup [
7,
8,
9] and inter-regional environmental inequality [
6,
10], causes of problems [
11,
12,
13], and mitigation strategies [
1,
6,
14,
15]. Many researchers have contributed solutions to curb interregional pollution transfer and environmental inequality [
6,
16,
17,
18]. However, owing to data limitations, few studies have revealed the effects of intraurban pollution transfer, especially the differences in pollution between urban centers and neighboring rural areas.
Fortunately, some scholars have gradually begun to pay attention to UUEI, but they still mainly focused on the causes of UUEI, with most studies based on theoretical and qualitative analysis. For example, based on theoretical analysis, Cao [
19] found that the special urban–rural structural dichotomy and the “urban-centered” environmental protection model are important causes of UUEI in China. To the best of the authors’ knowledge, the study by Long et al. [
2] is currently the only study that focused on UUEI using empirical analysis. Based on data on the difference in pollution emission intensity between urban and rural firms in China, Long et al. [
2] used empirical evidence to reveal UUEI for the first time and emphasized the role of public environmental concern in alleviating UUEI. However, it is worth noting that the mechanism of informal regulation represented by public environmental concern is still to draw the government’s attention to environmental problems, increase the government’s investment in environmental management, and improve the government’s regulation [
2], which remains limited by insufficient resources for formal environmental regulation to correct UUEI. However, it is worth noting that the mechanism of informal regulation, represented by public environmental concern, has yet to draw the government’s attention to environmental issues, increase government investment in environmental management, and improve government regulation [
2]. The alleviation of UUEI is still limited by insufficient resources for formal environmental regulation. Considering China’s severe pollution situation and its large rural population, it is particularly urgent to explore potential pathways to alleviating China’s UUEI in the context of limited regulatory resources and a lack of formal environmental regulation in rural areas.
It is worth mentioning that Chinese enterprises have unique organizational governance characteristics. The Communist Party of China (CPC) monitors and advises private enterprises on business decisions, compliance with the law, and workers’ rights and interests through the establishment of Party branches in the private sector. Existing literature suggests that corporate party organizations play an important role in safeguarding workers’ welfare [
20], providing employment protection [
21,
22], facilitating the participation of private firms in social governance [
23], and boosting research and development (R&D) investment [
24]. Therefore, regional grassroots party organizations may be able to improve the environmental governance behaviors of rural enterprises, thus alleviating UUEI. But whether and how regional grassroots party organizations affect rural–urban environmental inequality remains unclear. There is a lack of empirical research on grassroots party organizations and UUEI. If grassroots Party organization in enterprises can effectively alleviate UUEI, and its role is not constrained by the limited resources of formal environmental regulation, grassroots Party organizations could become an effective path to improve environmental inequality, providing limited resources for formal environmental regulation. This is especially the case in the context of the continuous promotion of the creation of grass-roots Party organizations in Chinese enterprises (By the end of 2016, 1.9 million private enterprises (68 percent) had established party branches, an increase of 16 percent from 2015 (Organization Department of the Central Committee of the Communist Party of China, 2017)).
On the basis of the above theoretical and practical background, this paper uses data from the Chinese Private Enterprise Survey (CPES) 2006–2014 to reveal the trends in urban–rural environmental inequality in China by manually collecting data on the geographic location of private enterprises and examining how party organization embeddedness affects UUEI. The main findings of this paper are as follows: (1) Investment in environmental management of polluting enterprises in rural areas is significantly lower than in urban areas, and UUEI is intensifying. (2) Heterogeneity analysis revealed that UUEI is more pronounced at the enterprise level in areas with larger enterprises and greater environmental enforcement and that urban-centered environmental regulatory policies continue to exacerbate UUEI. (3) Regional party organization embeddedness can narrow the gap between urban and rural environmental investment by private enterprises and alleviate UUEI. This positive effect stems from the fact that the embeddedness of party organizations can enhance the degree of policy implementation by rural enterprises and stimulate the environmental investment behavior of rural enterprises.
This paper makes the following marginal contributions to the literature: (1) In the context of literature on regional environmental inequality, in contrast to studies on the total amount of pollution emissions and the number of polluting enterprises at the regional level [
25,
26,
27], this paper reveals environmental inequality for the first time from the micro perspective of corporate environmental protection investment. This perspective not only reveals the causes of environmental inequality in terms of the total amount and intensity of pollution but also reflects the developmental trend of environmental inequality, thereby expanding the understanding and research boundaries of environmental inequality. (2) In the context of the distinct national conditions of China’s dualistic structure and distinguishing itself from existing research on interregional environmental inequality, this paper manually collected private enterprises’ urban and rural locations, and determined the difference in environmental investment between urban and rural firms, focusing on revealing the unique urban–rural environmental inequality within Chinese regions; to a certain extent, compensating for the shortcomings of the literature on China’s environmental inequality, which fails to accurately penetrate the Chinese context. (3) The literature has seldom explored the evidence and solutions regarding the environmental inequality between urban and rural areas in China from an empirical perspective [
2]. In contrast, this paper reveals the trends in UUEI in China based on data on corporate environmental investment and party organization embeddedness and found that party organization embeddedness can effectively improve deteriorating UUEI, which provides a solution to alleviate the increasing UUEI under limited regulatory resources in rural areas and with the absence of formal environmental regulation. (4) This paper provides a new research perspective on informal environmental regulation, expanding the perspective from external public participation and public opinion supervision to the grassroots party organizations within the enterprise, highlighting the role of grassroots party organizations embedded in environmental governance, especially in alleviating UUEI under limited environmental regulatory resources, revealing its unique internal supervision advantages. Thus, this paper enriches research in the field of informal environmental regulation.
The remainder of the paper is structured as follows: Part II conducts theoretical analysis and presents the research hypotheses; Part III introduces the empirical research design; Part IV presents the empirical results and analyses; Part V provides further analyses; and Part VI presents the conclusions and policy implications.
2. Theoretical Analysis and Research Hypotheses
Since the 1980s, as China’s urbanization process has accelerated, rising land and labor prices and the intensity of environmental regulations have forced industrial enterprises to gradually move to rural areas. According to certain statistics, by 1995, the proportion of overall industrial pollution accounted for by township and village enterprises had increased from 11% in the 1980s to 45%; in 2008, 66.37 percent of all industrial emissions came from polluting enterprises in rural areas. However, despite the continuous invasion of pollution into rural areas, China is characterized by urban-centrism in terms of the environment, legislation, and law enforcement [
28]: the state, provinces, and municipalities focus on environmental remediation in urban areas, with cities allocating most of the resources, including financial support, on the formulation of policies and regulations. Consequently, the costs and risks of pollution emissions from enterprises in rural areas are lower than those in urban areas [
29]. Profit-maximizing rural firms choose to generate as much pollution as possible until their marginal gains from emitting additional pollution decline to zero [
30], rather than choosing green innovations with high inputs, high risks, and lagging returns. Even if technological reform and end-of-pipe treatment equipment are mature, rural enterprises prefer low-risk and “zero-cost” emissions theft and leakage in the absence of environmental monitoring networks. Therefore, industrial enterprises in rural areas not only have a higher pollution intensity per unit of output value than those in urban areas [
2] but also have a lower environmental protection investment and environmental governance willingness than those in urban areas. It is worth pointing out that the characteristics of UUEI may also be heterogeneous across regions, given the significant differences in enterprise size, regional economic characteristics, and environmental regulations in China. In particular, the strength of enforcement of environmental regulations and the spatial allocation of environmental regulatory resources between urban and rural areas can significantly affect the urban–rural transfer and pollution characteristics of polluting enterprises within a region, and thus the characteristics of regional UUEI. Thus, this paper puts forward Hypothesis H1:
H1. There are significant differences in environmental investment between urban and rural enterprises, but there will be heterogeneity in the characteristics of environmental inequality between urban and rural areas, influenced by the enterprise size and regional characteristics.
In the absence of formal environmental regulations, how can the pollution emission behavior of rural industrial enterprises be effectively regulated to curb UUEI? In the current context, where formal environmental regulation resources remain scarce, public and media monitoring with lower regulatory costs has become important to compensate for the lack of formal environmental regulation. Long et al. [
2] found that public environmental participation mitigates urban–rural differences in pollution intensity and compensates for the lack of formal environmental regulatory power in rural areas by influencing the government’s regulatory behavior. However, although public environmental participation can reduce the cost of pollution monitoring and improve the efficiency of government environmental enforcement, the role of public environmental participation in curbing UUEI is still limited, because of the government’s capacity and resource constraints for environmental enforcement in rural areas. On the other hand, both public environmental participation and media monitoring are “passive” regulatory approaches that focus on listed or heavily polluting enterprises. Moreover, the role of public environmental regulation is relatively limited for most private enterprises in rural areas because of the relatively low awareness of environmental protection in the countryside, among other factors. Therefore, the key to alleviating the inequality between urban and rural environments is a less costly and more proactive approach to environmental regulation.
Chinese enterprises have unique organizational governance characteristics. The CPC monitors and advises private enterprises on business decisions, compliance with the law, and workers’ rights and interests through the establishment of Party branches in the private sector. The existing literature has suggested that corporate party organizations make a great contribution to safeguarding workers’ welfare [
20], providing employment protection [
21,
22], facilitating the participation of private firms in social governance [
23], and boosting research and development (R&D) investment [
24]. Enterprise party organizations play an important role in the implementation of central government policies by enterprises, and are an important hub for the synergy between the government and enterprises [
31,
32]. Moreover, the above studies provide some empirical evidence for the speculations in this paper. Regional enterprise grassroots party organizations may be able to improve corporate environmental governance behavior, thereby alleviating UUEI. Moreover, private entrepreneurs themselves are equally willing to establish party organizations in their firms [
33,
34]. This is because, as a natural political connection, party organizations can help private firms maintain good political relations with local governments [
35]. This helps private firms to obtain bank loans; reduce cumbersome aspects of the communication process with the government [
36,
37]; and in this way, obtain higher corporate profits than non-Party private firms [
38]. With the joint efforts of the CPC and private firms, 1.9 million private firms (68%) had established Party branches by the end of 2016 (Organization Department of the Central Committee of the Communist Party of China, 2017). If grassroots Party organization in enterprises can effectively alleviate UUEI, and if its role was not constrained by the limited resources of formal environmental regulation, grassroots Party organizations could become an effective path to improving the environment inequality, by providing limited resources of formal environmental regulation. This is especially the case in the context of the continuous promotion of the construction of grass-roots Party organizations in Chinese enterprises. This paper therefore proposes Hypothesis H2:
H2. The construction of regional grassroots party organizations can reduce the gap between the urban and rural environmental investments of industrial enterprises under resource constraints on formal environmental regulation, and alleviate UUEI.
Compared with “forced” governance under public participation and media monitoring, grassroots party organizations are more inclined to enhance the “initiative” of corporate environmental governance in areas where formal regulation is lacking. On the one hand, private enterprise party organizations are an important link between the Party, the government, and enterprises for collaborative environmental governance. The construction of regional grassroots party organizations can enhance the self-regulation and social responsibility of industrial enterprises through party supervision, thus checking and balancing corporate agency conflicts and enhancing the enterprises’ awareness regarding their social responsibility for environmental protection [
39,
40]. On the other hand, improved construction of regional grassroots party organizations can motivate enterprises to proactively cooperate with the government’s policies, including environmental governance and technological upgrading, and thus improve enterprises’ willingness to protect the environment. Thus, Hypothesis H3 is proposed.
H3. Regional grassroots party organization construction can reduce the difference in environmental investment between urban and rural enterprises and alleviate UUEI by increasing the degree of corporate social responsibility and policy implementation.
3. Research Design
3.1. Sample Selection and Data Sources
As of May 2023, the number of Chinese private enterprises exceeded 50 million, and the share of private enterprises among enterprises had increased to 92.4%, making them the major component of Chinese enterprises. Thus, the important role of private enterprises in UUEI in China is self-evident. To empirically test whether there is urban–rural environmental inequality in China in terms of investment in environmental emissions reduction and to explore the mechanism of the role of party organization embeddedness in mitigating urban–rural environmental inequality, this paper used data from the Chinese Private Enterprise Survey (CPES). The data were collected by the joint research team, which is composed of the United Front Work Department of the CPC Central Committee, the State Administration for Industry and Commerce, the China Federation of Industry and Commerce, and the China Association for the Study of Private Economy. The data survey has been conducted every two years since 1993. Currently, the data has been updated to 2016. However, due to the lack of enterprise location zip code and enterprise emission reduction investment data in the 2016 survey, this paper chose the 2006–2014 data as the research sample.
The 2006–2014 data survey used multi-stage sampling to identify a nationwide sample of private enterprises at a certain percentage (around 0.05%, with slight variations in the percentage each time), encompassing enterprises of different industries, sizes, and types in all 31 provinces, autonomous regions, and municipalities directly under the central government in mainland China. Samples with missing core information were eliminated. The locations of enterprises were parsed via postal codes to determine their urban and rural attributes. On that basis, this article classified the industries of the sampled enterprises according to China’s National Economic Industry Classification standards, taking more polluting industries as the research object, including mining, manufacturing, and the production and supply of electricity, gas, and water. In addition, to control for the influence of outliers on the regression results, after the continuous variables were reduced by the 1% and 99% quantiles, the final data containing 5892 enterprises in 24 provinces and cities across the country from 2006 to 2014 were obtained.
In addition, considering the impact of regional characteristics on urban–rural environmental inequality, this paper controlled for characteristics such as the level of regional economic development and the intensity of environmental regulation. The macrolevel data were mainly drawn from the China Statistical Yearbook, with missing data manually supplemented by data from government statistical bulletins. Then, this research matched the city-level data with the above firm-level data via firm location information.
3.2. Empirical Strategy
To test the above hypotheses and analyze urban–rural environmental inequality in terms of China’s environmental emission reduction investment, the empirical strategy of this paper was divided into three steps.
First, this paper established a baseline regression model to identify the factors affecting enterprises’ environmental abatement investment behavior. The model was used to test whether there are significant differences in environmental abatement investment between urban and rural enterprises to reveal urban–rural environmental inequality in terms of China’s environmental abatement investment. The model design is shown in Equation (1):
where
represents the environmental emission reduction investment of enterprise
i in city
j in year
t, which is measured by the logarithm of the actual emission reduction investment of the enterprise. A higher EPI indicates that the enterprise pays more attention to environmental protection and its own environmental emission reduction behaviors in production and operation, whereas an enterprise with a lower EPI is regarded as unsustainable and will emit a large amount of pollution during the survival period, which will exacerbate the environmental pollution in the region.
is a dummy variable that takes a value of 0 when enterprise i is located in urban areas and 1 otherwise.
is an entrepreneur-level control variable, and
is an enterprise-level control variable. In addition, region fixed effects (
) and year fixed effects (
) were added to the model design to reduce the estimation bias caused by region and year characteristics.
is the error term.
is the first core coefficient of interest in this paper; if it is significantly negative, then the investment in emissions reduction of rural enterprises is significantly lower than that in urban areas. This outcome implies that not only is there inequality between urban and rural environments in terms of investment in environmental mitigation but also that this inequality gap is exacerbated.
Second, the degree of embeddedness of regional party organizations in private enterprises was introduced into the estimation model as a moderating variable to assess its impact on UUEI and to reveal the moderating effect of party regulation as informal environmental regulation in UUEI. The model design is shown in Equation (2):
where
is the degree of embeddedness of party organizations in private enterprises in city
j, which is measured by the proportion of private enterprise party branches established in the region. Then, the interaction term
was added to the model.
is the coefficient of interest in this paper, which reveals how the urban–rural environmental emission reduction investment differences are moderated by party regulation. If
is significantly negative and
is positive, party organizations’ embeddedness in private enterprises can effectively narrow the differences in environmental emission reduction investment between urban and rural areas, and thus inhibit the degree of environmental inequality between urban and rural areas.
Finally, this paper proposed a mechanism of action framework to understand how regional party organizational embeddedness narrows environmental abatement investments by rural and urban firms. As proposed in Hypothesis 3, building regional grassroots party organizations can narrow the difference in environmental abatement investment between urban and rural firms by increasing the social responsibility and policy implementation of rural firms. This paper employed a stepwise regression model to test the above mechanism framework, as shown in Models (3) and (4):
where
denotes the degree of firms’ perceptions of social responsibility and policy implementation, which are measured by a dummy variable for firms’ perceptions of social responsibility and the effect of innovation policy implementation (patent ownership), respectively. The other model designs are the same as those in Equation (1). Equation (3) examines the impact of regional grassroots party organization building on rural enterprises’ perception of social responsibility and the degree of policy implementation, and, on the basis of Equation (4), further tests the impact of the above mechanisms in reducing the difference between urban and rural enterprises’ investment in emission reduction, to reveal the moderating mechanism of building regional grassroots party organization in curbing the inequality between urban and rural environments.
3.3. Variable Definitions and Statistical Descriptions
3.3.1. Dependent Variable: Corporate Environmental Protection Investment (EPI)
The literature on UUEI has mainly focused on pollution emissions [
2]. In this way, it reveals the current status of environmental inequality. However, less consideration has been given to how to correct environmental inequality [
6]. Therefore, this paper explored urban–rural environmental inequality in the dimension of environmental investment from the perspective of corporate environmental investment, which not only enriches the understanding of urban–rural environmental inequality but is also crucial for alleviating urban–rural environmental inequality in pollution emissions. Accordingly, this paper adopted “firms’ pollution control investment in the current year” to measure the environmental protection investment behavior (EPI) of firms and reveals the environmental protection differences in China’s UUEI by examining the differences in environmental protection investment between urban and rural firms. In addition, considering that enterprise pollution control investment is significantly related to enterprise size [
24], this paper further measured “enterprise pollution control investment in the current year/enterprise sales revenue” (EPI_out) to eliminate the estimation bias caused by the enterprise size effect [
41].
By comparing the EPI data of urban and rural enterprises (
Table 1), this paper found that the environmental governance investment of urban enterprises is significantly higher than that of rural enterprises. Moreover, the t test results were significant after controlling for the effect of enterprise size, which, to a certain extent, explains the existence of environmental governance differences between urban and rural areas, which will continue to exacerbate the existing UUEI.
3.3.2. Moderating Variable: Regional Grassroots Party Organization Construction
Grassroots party organizations are not only important driving forces that encourage enterprises to assume environmental responsibility but also important nodes for collaborative environmental governance between the government and enterprises [
24]. To test whether the degree of embeddedness of regional party organizations can inhibit urban–rural environmental inequality, this paper adopted “the number of enterprises with regional party organizations/the number of regional private enterprises” (
) to measure the degree of embeddedness of regional party organizations.
3.3.3. Mediating Effect Variables
The above theoretical analysis indicates that the establishment of enterprise party organizations can increase enterprises’ awareness of social responsibility, policy implementation, and government resource support, which in turn can regulate their environmental investment behavior. In this paper, we asked the following question in the questionnaire: “What is your attitude toward nonpublic enterprises’ participation in social management?”. The answer to the question “How do you feel about the participation of nonpublic enterprises in social management?” was used to measure corporate social responsibility (). When an enterprise replied “should participate in social management, this is the social responsibility of the enterprise”, the dummy variable took a value of 1; otherwise, it took a value of 0. The variable “enterprise R&D expenses/sales revenue” was used to indicate the degree of importance that enterprises attached to innovation and the support of government resources. Considering that innovation is an important policy guideline of the country, this variable was used to measure the degree of policy implementation by enterprises ().
3.3.4. Control Variables
On the basis of existing studies [
24,
42,
43,
44], this paper introduced entrepreneur-level and firm-level variables, including entrepreneur age (Age), gender (Female), education (Edu), firm age (F_age), number of employees (Labor), innovative technology (Innovation), sales revenue (Output), net profit (Profit), fixed assets (Fixed), and Association of Industry and Commerce Social Networks (AIC). The measures and statistical descriptions of each of these variables are shown in
Table 2.
6. Policy Implications: How to Alleviate Urban–Rural Environmental Inequalities?
The current structural, root, and trend pressures on ecological environmental protection in China have not been fundamentally alleviated. As a typical structural problem, urban–rural environmental inequality urgently needs to be considered and resolved by the government and society. Against the backdrop of weak rural formal regulation, the above findings have important policy implications for alleviating the growing UUEI, as well as for promoting sustainable development in rural areas.
First, the situation of rural non-face source pollution remains critical [
59], especially the lack of adequate resources for environmental regulation. Policy-makers need to pay more attention to the worsening issue of UUEI in the context of the weak formal regulatory power in the countryside. The findings of this paper show that firms in rural areas not only pollute more intensively than those in urban areas [
2] but also invest significantly less in environmental management than those in urban areas, and that UUEI is worsening. Therefore, the government must pay more attention to the supervision of polluting enterprises in rural areas, and environmental resources should be aimed toward rural areas to optimize the urban–rural structure of environmental regulation [
60]. Specifically, the government should increase its efforts in rural environmental protection and realize a shift from “urban-centrism” to equal emphasis on both urban and rural areas in environmental protection and governance. National and local governments should increase investment in rural environmental protection, increase financial transfers, accelerate the construction of rural environmental protection infrastructure, and strengthen grass-roots environmental protection organizations and teams, to enhance rural pollution control and ecological environmental protection [
61].
Second, informal regulatory forces should be seen as an important complement to formal regulation. Owing to the lack of resources for environmental regulation, policies should make full use of informal regulatory forces to regulate the environmental behaviors of rural enterprises. The empirical results showed that the embeddedness of party organizations as an informal regulatory force can effectively enhance policy implementation by rural firms, thereby alleviating UUEI. Specifically, the government should encourage rural enterprises to set up party organizations, accept party leadership, strictly abide by party discipline, and use party regulation to supplement current formal environmental regulation in rural areas. Specifically, for China, the CPC should broadly utilize self-regulation as a complement to informal environmental regulation, guiding enterprises in upgrading and adopting cleaner production, thereby reducing pollution emissions in areas where environmental regulation resources are scarce. It is worth noting that China’s unique approach to informal environmental regulation is less applicable to other countries, but still worthy of consideration. Existing studies have shown that informal environmental regulatory instruments such as labor unions [
62,
63,
64], religions [
65,
66], and public environmental concern [
2] can all have an impact on pollution emissions, with a dampening effect. Therefore, other countries can also focus on the role of informal environmental regulation such as labor unions, religions, or residents in regions with relatively few resources for formal environmental regulation, so as to achieve overall regional sustainable development.
Finally, firms’ innovative technological behavior and social networks increase their environmental investment. The empirical results provided some practical ideas for enhancing rural firms’ emission reduction behavior. Owing to the higher marginal abatement cost of pollution in rural areas, technological innovation has become an important way for enterprises to reduce emissions and secure profits, so the government should focus on encouraging and subsidizing enterprise innovation in rural areas, to increase their willingness to innovate and thus realize the double dividends of enterprise emission reduction and profits. At the same time, it should fully exploit the role of social networks of enterprises; encourage enterprises to participate in the Federation of Industry and Commerce, industry associations, and other organizations; and increase the positive influence of social organizations on the emission reduction behavior of enterprises [
67].