Strategic Interactions in Environmental Regulation Enforcement: Evidence from Chinese Provinces
AbstractThis paper studies whether Chinese provinces set strategically their environmental stringency when faced with interprovincial competition for mobile capital. Using Chinese provincial data and spatial panel econometric models, we find that Chinese provinces do engage in this kind of strategic interaction, particularly among those with similar industrial structure. Furthermore, we haven't found evidence of asymmetric responsiveness suggested by the race to the bottom theory. Finally, the one-sided fiscal decentralization is likely to strengthen the strategic behavior. These empirical results call for a skeptical attitude towards China's decentralization of environment policy implementation as well as its fiscal arrangements.
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Date of creation: 21 Feb 2012
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China; strategic interaction; pollution; spatial panel;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-08 (All new papers)
- NEP-ENV-2012-03-08 (Environmental Economics)
- NEP-RES-2012-03-08 (Resource Economics)
- NEP-TRA-2012-03-08 (Transition Economics)
- NEP-URE-2012-03-08 (Urban & Real Estate Economics)
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