This paper examines how air pollution affects the distribution of labor income within firms. We build a within-firm incentive model and show that air pollution, treated as an exogenous shock, reduces production efficiency and increases operating uncertainty. In response, firms compress both employee and executive compensation. Because executive pay carries a larger weight on performance- and equity-based components and is therefore more sensitive to profit volatility, it declines by more, mechanically narrowing within-firm pay dispersion. At the same time, rank-and-file wages display downward rigidity. The result is a “synchronized decline with sharper cuts at the top,” a form of spurious equality. Using 2014–2022 data on non-financial A-share listed firms in China, we find that a 1% increase in air pollution is associated with a 0.37% average decline in labor income. Effects are stronger in labor-intensive firms and in firms with weaker unions. Two-stage least squares estimates indicate real consequences: talent outflows and reduced innovation. By linking air quality to wage setting, human capital, and innovation, our results reveal a sustainability channel through which pollution undermines decent work and inclusive growth—issues of global relevance for urban economies. The mechanisms we document are likely to generalize beyond China and inform integrated policies that combine environmental regulation with labor-market and innovation policy to support a just and sustainable transition.

This paper exploits China's pilot emissions trading scheme (ETS) as a quasi-natural experiment to identify the causal effect of environmental regulation on corporate digital transformation. We find that ETS, on average, promotes corporate digital transformation; however, this average effect conceals substantial industry divergence. Specifically, firms in heavily polluting industries exhibit significantly lower levels of digital transformation than firms in less-polluting industries after the implementation of ETS. This pattern suggests that carbon regulation raises compliance and abatement costs and crowds out R&D investment in heavily polluting industries. By contrast, firms in industries not directly covered by the policy experience significantly higher levels of digital transformation, consistent with a resource reallocation channel. Further analysis shows that CEOs with academic backgrounds are more likely to promote digital upgrading under regulatory pressure. In addition, among affected industries, firms with higher levels of digital transformation are more likely to obtain government environmental subsidies and undertake more environmental investment, suggesting that digital capability may serve as an important foundation for improving environmental governance and regulatory compliance. Our findings provide new empirical evidence on how developing economies can better coordinate environmental regulation and digital upgrading during the green transition.

This paper examines how accelerated population aging affects entrepreneurship in China. We find that faster aging significantly reduces entrepreneurship. The decline is stronger for individual businesses, smaller firms, and tertiary-sector entry. Aging also shifts entry toward larger firms and industries with higher capital intensity and lower R&D intensity. These findings suggest that aging affects business dynamism not only by lowering entry overall, but also by reallocating entry toward activities better able to adapt to labor scarcity through capital substitution.

This paper examines whether the composition of crowded public-fund ownership shapes the market effects of common redemption shocks. Using Chinese A-share data from 2021 to 2024, we separate overall crowding among public equity funds from the quantitative tilt in that crowding. Quantitative-tilt outflow exposure predicts a larger contraction in turnover-based trading participation, while the effect of average-crowding exposure is much weaker. A one-standard-deviation increase in quantitative-tilt outflow exposure is associated with a 0.57% decline in average daily value turnover. Mechanism tests show that trading participation falls in the outflow quarter and recovers in the following quarter. The effect is stronger for stocks with high Amihud illiquidity, large downside price impact, or weak post-close trading support. Our findings show that investor composition matters for the transmission of redemption pressure and that trading absorption capacity shapes its market effects.