Greening of Chinese industrial sector: Stakeholders' responsiveness to non-governmental environmental monitoring

By merging all the industrial enterprises above designated size (over 300 thousand in 2013) at both the city level and the industry level, we examine the green transformation process of China's industrial sector for nearly 300 prefecture-level cities between 2004 and 2013. Since about 40% of these cities are under non-governmental environmental monitoring by means of releasing the pollution information transparency index (PITI) annually, we then empirically evaluate the green responses of Chinese industrial sector to the non-governmental environmental monitoring from a randomized natural field experiment by employing a difference-in-differences (DID) approach. The results indicate that the PITI release by a third party could significantly contribute to the green transformation of local industrial sector, and the effects are stronger in cities with more stringent environmental regulation and higher levels of economic development and marketization. Moreover, production factors appear to be reallocated from the polluting sectors to the non-polluting sectors to green the industrial sector. Specifically, more and more capitals and labors are invested in the non-polluting sectors in the cities with the PITI disclosure. Existing firms may exit the market, and forthcoming polluting firms are nipped in the bud.