How does environmental regulation affect ecological efficiency? What is the role of industrial transfer in the mechanism of action? Relations and interactions between the three determine economic quality when ecological performance is concerned. Empirical studies in this paper are based on samples from the Yangtze River economic belt in China, which contributes nearly half of China's GDP. By measuring environmental regulation, industrial transfer, and ecological efficiency, data and indexes are prepared for investigating the driving mechanism of environmental regulation and illustrating of the role of industrial transfer. By applying the Markov process to model industrial transfer between regions, the dynamic of transfer is simulated and facilitates further study on the effects of industrial transfer. Finally, this paper concludes that by targeting on the improvement of ecological efficiency, environmental regulation releases its utility through industrial transfer. The highlights include three aspects. Theoretically, it illustrates the driving mechanism of improving the eco-efficiency by environmental regulation. Technically, it pioneers a methodology for describing the regional industrial transfer by modeling it with a Markov process. Practically, the conclusion supplies insights into the inherent law of sustainable development for policy makers.
Keywords: Markov process; ecological efficiency; environmental regulation; industrial transfer.