**6. Conclusions**

This study examined the e ffects of strengthened environmental regulations on employment and labor productivity by dividing the industries based on two criteria: environmental classification (green and non-green sectors) and carbon dioxide emissions (polluting and less-polluting industries). It used establishment-level panel data from 2004 to 2015 including the period in which the Government of Korea implemented the Low-Carbon Green Growth Act. Our empirical results lead to several conclusions. First, environmental regulations have negative e ffects on economic outcomes in polluting industries. Second, these e ffects are asymmetric between green and non-green sectors and this taxonomy is as important as whether a firm emits a larger quantity of CO2 emissions which has been the main focus of previous studies. Finally, the positive e ffects in the green sector can o ff-set a part of the negative e ffects of the polluting industries. This suggests that plants producing environmental goods in polluting industries were not hit hard by the environmental regulations.

This study contributes to environmental policy related research as it not only considers the e ffects of the regulations on the manufacturing industry but also considers the asymmetric e ffects between the green and non-green sectors. In Korea, the environmental industry has attracted attention as the driving force for new growth in the low-carbon green growth policy [34]. As environmental regulations have been strengthened internationally, the need for eco-friendly processes and environmental goods has increased. Environmental regulations or pressures could stimulate job creation and labor productivity in the green sector or at least these will not hinder the performance of this group even though it emits substantial greenhouse gases. Nonetheless, the emitters in the non-green sector su ffered because of the regulations and their productivity reduced. Therefore, restrictions and subsidies should be applied to firms considering their specific characteristics and GHG emissions.

This research has some limitations. First, it does not capture labor reallocations between industries or within local areas. Second, it uses 2–3 digit level data during 2012–15 to define polluting industries based on their CO2 emissions. Accounting for other pollutants, such as SO2 and use of an expanded dataset at the firm level will be informative. These limitations of the dataset may have hampered an accurate estimation of the e ffects. The empirical method in the paper was conducted without consideration of the firm dynamics accounting for the entry and exit of establishments. If future researches can capture input reallocation and decompose it between intensive and extensive margins, this enables distinguishing the di fferences in the regulations' e ffects on environmental and non-environmental sectors more clearly. In an attempt to reduce uncertainty, given data availability, future research can conduct more systematic sensitivity analysis of the results by accounting for the weaknesses listed above.

**Author Contributions:** Conceptualization, S.Y. and A.H.; methodology, S.Y. and A.H.; STATA software, S.Y.; validation, S.Y. and A.H.; formal analysis, S.Y. and A.H.; investigation, S.Y.; resources, S.Y.; data curation, S.Y.; writing—original draft preparation, S.Y.; writing—review and editing, A.H.; visualization, S.Y.; supervision, A.H.; project administration, A.H.; no funding acquired.

**Funding:** This research received no external funding. **Acknowledgments:** The authors are grateful to the Department of Economics, Sogang University for facilitating access to industry data. We are grateful to the three anonymous referees and an editor of the journal for their comments and suggestions on an earlier version of this paper.

**Conflicts of Interest:** The authors declare no conflict of interest.
