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Governance on water pollution: Evidence from a new river regulatory system of China

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  • Wang, Huanhuan
  • Xiong, Jiaxin

Abstract

This paper investigates the impact of an innovative river regulatory system in China, the River Chief System, on industrial firms' polluting activities. Several unique features of this system make it quite different from traditional environmental regulations and thus draw our attention to its effect in combating water pollution. Using a generalized difference-in-differences strategy based on a rich firm-level data set, we find that this policy reduces firms' water pollution by 20%. The reduction can be explained by firms' increase in adopting abatement technologies, improvement in water-related usage efficiency, and changes along both the intensive and extensive margins. The tightened regulation reduces firms’ output while induces polluting firms to exit or impede their entry to regulated markets. In addition, heterogeneity analyses indicate that the River Chief System has a stronger effect on polluting industries, state-owned enterprises, large-scale firms, and firms located in areas governed by government officials with higher political incentives.

Suggested Citation

  • Wang, Huanhuan & Xiong, Jiaxin, 2022. "Governance on water pollution: Evidence from a new river regulatory system of China," Economic Modelling, Elsevier, vol. 113(C).
    • Handle: RePEc:eee:ecmode:v:113:y:2022:i:c:s0264999322001249
    DOI: 10.1016/j.econmod.2022.105878
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    Cited by:

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    2. Rui Ding & Fangcheng Sun, 2023. "Impact of River Chief System on Green Technology Innovation: Empirical Evidence from the Yangtze River Economic Belt," Sustainability, MDPI, vol. 15(8), pages 1-22, April.
    3. Jun, Xiao & Huang, Wenwei & Guo, Yiting & Cao, Yuqiang & Lu, Meiting, 2023. "Why does economic policy uncertainty increase firm-level pollutant emission?," Economic Modelling, Elsevier, vol. 129(C).
    4. Peng, Fei & Wang, Ling & Peng, Langchuan & Wu, Huaqing, 2023. "Local government fiscal squeeze, environmental regulation and firms’ polluting behavior: Evidence from China," Economic Modelling, Elsevier, vol. 125(C).

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    More about this item

    Keywords

    Environmental regulation; River Chief System; Water pollution;
    All these keywords.

    JEL classification:

    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law

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