Can the Behavioural Spillover Effect Affect the Environmental Regulations Strategy Choice of Local Governments?

ABSTRACT

Combined with the characteristics of the Chinese environmental regulation supervision system and evolutionary game theory, the spillover effect of local governments' investment behaviour has been incorporated into their payment function to study the influence of spillover on the strategy choice of local governments and enterprises. The results show that (1) the spillover effect is one of the reasons for distortions in the implementation of environmental regulations. Whether the influence of the spillover effect on the probability of local governments choosing the strategy of strict supervision is positive or negative depends on the environmental benefit of the local government's environmental protection investment. (2) Increasing the reward for the enterprise's complete green technology innovation behaviour is conducive to improving the probability of the enterprises choosing the strategy of complete green technology innovation, while it reduces the probability of local governments choosing the strategy of strict supervision. Increasing punishment for enterprises' incomplete green technology innovation behaviour is conducive to improving the probability of enterprises choosing the strategy of complete green technology innovation, but its impact on the probability of local governments choosing the strategy of strict supervision is uncertain due to the limitations of many factors. (3) Enterprises' emission reduction capacity is positively related to the probability of the enterprises choosing the strategy of complete green technology innovation and is negatively related to the probability of local governments choosing the strategy of strict supervision. The research conclusions provide a new explanation for the distorted enforcement of environmental regulations from the perspective of the spillover of local governments' investment behaviour.