IDEAS home Printed from https://ideas.repec.org/a/wly/reggov/v16y2022i4p983-1004.html
   My bibliography  Save this article

Fine me if you can: Fixed asset intensity and enforcement of environmental regulations in China

Author

Listed:
  • Xun Cao
  • Qing Deng
  • Xiaojun Li
  • Zijie Shao

Abstract

Why do some firms face more environmental regulatory actions than others? We present a theory focusing on firm‐fixed asset intensity. High fixed asset intensity makes a firm less mobile. A less mobile firm cannot present a credible exit threat, making it more susceptible to stringent enforcement. Analysis of key‐monitored firms in Jiangsu province, China of 2012–2014 shows that higher fixed asset intensity is associated with more pollution levies and a higher chance of receiving a punitive action. This result holds in a battery of robustness checks and an instrumental variable analysis. Furthermore, our 2018 online survey of Chinese firm managers shows that those from high fixed asset intensity firms indeed consider their firms less mobile and they pay more environment‐related operating costs. Finally, data from 2004 Chinese Firm‐Level Industrial Survey demonstrate that fixed asset intensity is positively associated with pollution levies in a national sample of 201,926 manufacturing firms.

Suggested Citation

  • Xun Cao & Qing Deng & Xiaojun Li & Zijie Shao, 2022. "Fine me if you can: Fixed asset intensity and enforcement of environmental regulations in China," Regulation & Governance, John Wiley & Sons, vol. 16(4), pages 983-1004, October.
    • Handle: RePEc:wly:reggov:v:16:y:2022:i:4:p:983-1004
    DOI: 10.1111/rego.12406
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/rego.12406
    Download Restriction: no
    File URL: https://libkey.io/10.1111/rego.12406?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Chen, Qiu & Maung, Min & Shi, Yulin & Wilson, Craig, 2014. "Foreign direct investment concessions and environmental levies in China," International Review of Financial Analysis, Elsevier, vol. 36(C), pages 241-250.
    2. Wang, Hua & Wheeler, David, 2005. "Financial incentives and endogenous enforcement in China's pollution levy system," Journal of Environmental Economics and Management, Elsevier, vol. 49(1), pages 174-196, January.
    3. Stefan Ambec & Mark A. Cohen & Stewart Elgie & Paul Lanoie, 2013. "The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness?," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(1), pages 2-22, January.
    4. Christian Almer & Timo Goeschl, 2010. "Environmental Crime and Punishment: Empirical Evidence from the German Penal Code," Land Economics, University of Wisconsin Press, vol. 86(4), pages 707-726.
    5. Min Maung & Craig Wilson & Xiaobo Tang, 2016. "Political Connections and Industrial Pollution: Evidence Based on State Ownership and Environmental Levies in China," Journal of Business Ethics, Springer, vol. 138(4), pages 649-659, November.
    6. Cole, Matthew A. & Elliott, Robert J.R. & Okubo, Toshihiro, 2010. "Trade, environmental regulations and industrial mobility: An industry-level study of Japan," Ecological Economics, Elsevier, vol. 69(10), pages 1995-2002, August.
    7. Judith M. Dean & Mary E. Lovely & Hua Wang, 2017. "Are foreign investors attracted to weak environmental regulations? Evaluating the evidence from China," World Scientific Book Chapters, in: Mary E Lovely (ed.), International Economic Integration and Domestic Performance, chapter 9, pages 155-167, World Scientific Publishing Co. Pte. Ltd..
    8. David Switzer & Manuel P. Teodoro, 2018. "Class, Race, Ethnicity, and Justice in Safe Drinking Water Compliance," Social Science Quarterly, Southwestern Social Science Association, vol. 99(2), pages 524-535, June.
    9. Francesca Spina, 2015. "Environmental Justice and Patterns of State Inspections," Social Science Quarterly, Southwestern Social Science Association, vol. 96(2), pages 417-429, June.
    10. Guojun He & Shaoda Wang & Bing Zhang, 2020. "Watering Down Environmental Regulation in China," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(4), pages 2135-2185.
    11. Benjamin van Rooij & Rachel E. Stern & Kathinka Fürst, 2016. "The authoritarian logic of regulatory pluralism: Understanding China's new environmental actors," Regulation & Governance, John Wiley & Sons, vol. 10(1), pages 3-13, March.
    12. Hua Wang & Nlandu Mamingi & Benoit Laplante & Susmita Dasgupta, 2003. "Incomplete Enforcement of Pollution Regulation: Bargaining Power of Chinese Factories," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 24(3), pages 245-262, March.
    13. Magali A. Delmas & Michael W. Toffel, 2008. "Organizational responses to environmental demands: opening the black box," Strategic Management Journal, Wiley Blackwell, vol. 29(10), pages 1027-1055, October.
    14. Susmita Dasgupta & Mainul Huq & David Wheeler & Chonghua Zhang, 2001. "Water pollution abatement by Chinese industry: cost estimates and policy implications," Applied Economics, Taylor & Francis Journals, vol. 33(4), pages 547-557.
    15. Josh Ederington & Arik Levinson & Jenny Minier, 2005. "Footloose and Pollution-Free," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 92-99, February.
    16. Jiang, Tingsong & McKibbin, Warwick J., 2002. "Assessment of China's pollution levy system: an equilibrium pollution approach," Environment and Development Economics, Cambridge University Press, vol. 7(1), pages 75-105, February.
    17. Robson Tigre & Breno Sampaio & Tatiane Menezes, 2017. "The Impact Of Commuting Time On Youth'S School Performance," Journal of Regional Science, Wiley Blackwell, vol. 57(1), pages 28-47, January.
    18. David M. Konisky & Manuel P. Teodoro, 2016. "When Governments Regulate Governments," American Journal of Political Science, John Wiley & Sons, vol. 60(3), pages 559-574, July.
    19. Wu, Mingqin & Cao, Xun, 2021. "Greening the career incentive structure for local officials in China: Does less pollution increase the chances of promotion for Chinese local leaders?," Journal of Environmental Economics and Management, Elsevier, vol. 107(C).
    20. Laplante, Benoit & Rilstone, Paul, 1996. "Environmental Inspections and Emissions of the Pulp and Paper Industry in Quebec," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 19-36, July.
    21. Jodi L. Short, 2021. "The politics of regulatory enforcement and compliance: Theorizing and operationalizing political influences," Regulation & Governance, John Wiley & Sons, vol. 15(3), pages 653-685, July.
    22. Cai, Hongbin & Chen, Yuyu & Gong, Qing, 2016. "Polluting thy neighbor: Unintended consequences of China׳s pollution reduction mandates," Journal of Environmental Economics and Management, Elsevier, vol. 76(C), pages 86-104.
    23. Simmons, Beth A. & Elkins, Zachary, 2004. "The Globalization of Liberalization: Policy Diffusion in the International Political Economy," American Political Science Review, Cambridge University Press, vol. 98(1), pages 171-189, February.
    24. Thomas Heberer & Anja Senz, 2011. "Streamlining Local Behaviour Through Communication, Incentives and Control: A Case Study of Local Environmental Policies in China," Journal of Current Chinese Affairs - China aktuell, Institute of Asian Studies, GIGA German Institute of Global and Area Studies, Hamburg, vol. 40(3), pages 77-112.
    25. Natarajan Balasubramanian & Jeongsik Lee, 2008. "Firm age and innovation," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 17(5), pages 1019-1047, October.
    26. Elena Huergo & Jordi Jaumandreu, 2004. "How Does Probability of Innovation Change with Firm Age?," Small Business Economics, Springer, vol. 22(3_4), pages 193-207, April.
    27. Seroa da Motta, Ronaldo, 2006. "Analyzing the environmental performance of the Brazilian industrial sector," Ecological Economics, Elsevier, vol. 57(2), pages 269-281, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wu, Mingqin & Cao, Xun, 2021. "Greening the career incentive structure for local officials in China: Does less pollution increase the chances of promotion for Chinese local leaders?," Journal of Environmental Economics and Management, Elsevier, vol. 107(C).
    2. Wu, Haoyi & Guo, Huanxiu & Zhang, Bing & Bu, Maoliang, 2017. "Westward movement of new polluting firms in China: Pollution reduction mandates and location choice," Journal of Comparative Economics, Elsevier, vol. 45(1), pages 119-138.
    3. Hering, Laura & Poncet, Sandra, 2014. "Environmental policy and exports: Evidence from Chinese cities," Journal of Environmental Economics and Management, Elsevier, vol. 68(2), pages 296-318.
    4. Chen, Zhao & Kahn, Matthew E. & Liu, Yu & Wang, Zhi, 2018. "The consequences of spatially differentiated water pollution regulation in China," Journal of Environmental Economics and Management, Elsevier, vol. 88(C), pages 468-485.
    5. Judith M. Dean & Mary E. Lovely & Hua Wang, 2017. "Are foreign investors attracted to weak environmental regulations? Evaluating the evidence from China," World Scientific Book Chapters, in: Mary E Lovely (ed.), International Economic Integration and Domestic Performance, chapter 9, pages 155-167, World Scientific Publishing Co. Pte. Ltd..
    6. Jota Ishikawa & Toshihiro Okubo, 2017. "Greenhouse-Gas Emission Controls and Firm Locations in North–South Trade," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(4), pages 637-660, August.
    7. Min Maung & Craig Wilson & Xiaobo Tang, 2016. "Political Connections and Industrial Pollution: Evidence Based on State Ownership and Environmental Levies in China," Journal of Business Ethics, Springer, vol. 138(4), pages 649-659, November.
    8. Sunghoon Chung, 2012. "Environmental Regulation and the Pattern of Outward FDI: An Empirical Assessment of the Pollution Haven Hypothesis," Departmental Working Papers 1203, Southern Methodist University, Department of Economics.
    9. Shiyu Bo, 2021. "Environmental Regulations, Political Incentives and Local Economic Activities: Evidence from China," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(3), pages 812-835, June.
    10. Jiangfeng Hu & Zhao Wang & Qinghua Huang & Xiaoqin Zhang, 2019. "Environmental Regulation Intensity, Foreign Direct Investment, and Green Technology Spillover—An Empirical Study," Sustainability, MDPI, vol. 11(10), pages 1-15, May.
    11. Liu, Wei & Zhao, Zhihui & Wen, Zhao & Cheng, Shixiong, 2022. "Environmental regulation and OFDI: Evidence from Chinese listed firms," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 191-208.
    12. Alm, James & Shimshack, Jay, 2014. "Environmental Enforcement and Compliance: Lessons from Pollution, Safety, and Tax Settings," Foundations and Trends(R) in Microeconomics, now publishers, vol. 10(4), pages 209-274, December.
    13. Guangdong Xu & Wenming Xu & Shudan Xu, 2018. "Does the establishment of the Ministry of Environmental Protection matter for addressing China’s pollution problems? Empirical evidence from listed companies," Economics of Governance, Springer, vol. 19(3), pages 195-224, August.
    14. Wayne B. Gray & Jay P. Shimshack, 2011. "The Effectiveness of Environmental Monitoring and Enforcement: A Review of the Empirical Evidence," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(1), pages 3-24, Winter.
    15. Yaru Tang & Mengdi Liu & Fan Xia & Bing Zhang, 2024. "Informal regulation by nongovernmental organizations enhances corporate compliance: Evidence from a nationwide randomized controlled trial in China," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 43(1), pages 234-257, January.
    16. Jie Jiang & Qihang Zhang & Yifan Hui, 2023. "The Impact of Market and Non-Market-Based Environmental Policy Instruments on Firms’ Sustainable Technological Innovation: Evidence from Chinese Firms," Sustainability, MDPI, vol. 15(5), pages 1-21, March.
    17. Rui Pang & Minjun Shi & Dan Zheng, 2022. "Who comply better? The moderating role of firm heterogeneity on the performance of environmental regulation in China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(5), pages 6302-6326, May.
    18. Li, Feiyang & Lin, Ziyue & Huang, Liangxiong & Yang, Caiting, 2022. "Environmental regulation and global value chain division position：Analysis based on global transnational data," Energy Policy, Elsevier, vol. 168(C).
    19. Ouyang, Xiaoling & Li, Qiong & Du, Kerui, 2020. "How does environmental regulation promote technological innovations in the industrial sector? Evidence from Chinese provincial panel data," Energy Policy, Elsevier, vol. 139(C).
    20. Da Gao & Yi Li & Qiuyue Yang, 2021. "Can pollution charges reform promote industrial SO2 emissions reduction?—Evidence from 189 China’s cities," Energy & Environment, , vol. 32(1), pages 96-112, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:reggov:v:16:y:2022:i:4:p:983-1004. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1111/(ISSN)1748-5991 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.