How Do China’s Development Zones Affect Environmental Pollution under Government Domination

Environmental pollution has recently become a serious economic issue, and finding ways to reduce pollution in economic development is an urgent task for developing countries, especially China. In this paper, we aim to document the policy role of development zones (DZs) in promoting China’s economic development on environmental pollution and consider the establishment of DZs as a quasi-natural experiment. Specifically, we identify the establishment of DZs on pollution emissions based on the staggered difference-in-difference (DID) approach by setting a dummy variable for DZ policies. Furthermore, we examine the heterogeneity of provincial and national (high-tech and economic development zones) DZs on pollution to detect the government domination effect. Finally, in order to deal with the potential spatial spillover effects of DZs, this paper applies the spatial difference-in-difference (SDID) method to explore the spatial reallocation effects of DZs. The results indicate that the provincial DZs can aggravate China’s pollution intensity, but they will no longer play the same role for national-level policies. Moreover, we find that national high-tech industrial DZs (HTZs) can reduce pollution intensity. In particular, the national DZs can bring about the reallocation of pollution among cities working as a selective place-based policy. That means that the national HTZs will not only reduce the local pollution intensity, but also reduce that of surrounding areas. Our empirical results highlight that cities should be encouraged to set up national HTZs in order to achieve an environmentally friendly high-quality development goal.