Environmental Degradation and Labor Market Dynamics in China: Evidence from the Environmental Phillips Curve

The Environmental Phillips Curve (EPC) has recently been tested for several economies and regions. However, the EPC hypothesis has yet to be tested for the Chinese economy. Accordingly, this research study assesses the EPC hypothesis in China, exploring whether unemployment dynamics influence environmental degradation during China’s transition toward greener economic growth. Utilizing data from 1991–2023, the study employs the ARDL methodology to evaluate the EPC hypothesis in both long and short run dynamics. The ARDL results validate the EPC, revealing a negative and statistically significant association between unemployment and environmental degradation. Granger causality tests further confirmed unidirectional causality from unemployment to environmental degradation. Additionally, the findings affirm the classic inverted U-shaped EKC for China, while highlighting the detrimental influences of traditional energy consumption and trade openness on environmental quality. These insights offer valuable policy guidance, marking this as the pioneering study to rigorously test the EPC hypothesis in China.