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Incentives and Outcomes: China’s Environmental Policy

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  • Jing Wu
  • Yongheng Deng
  • Jun Huang
  • Randall Morck
  • Bernard Yeung

Abstract

In generating fast economic growth, China is also generating growing concern about its environmental record. Using 2000-2009 data, we find that, while spending on environmental infrastructure has visible positive environmental impact, city spending is strongly tilted towards transportation infrastructure. Investment in transportation infrastructure correlates strongly with both real GDP growth, a measure of tangible economic growth relevant to city-level Party and government cadres’ promotion odds, and with land prices, which affect city governments’ revenues from land lease sales. In contrast, city governments’ spending on environmental improvements is at best uncorrelated with cadres’ promotion odds, and is uncorrelated with local GDP growth and land prices. These findings suggest that, were environmental quality explicitly linked to a cadre’s chance of promotion, or were environmental quality to affect land prices substantially, city-level public investment in environmental improvement would rise.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18754.

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Date of creation: Feb 2013
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Handle: RePEc:nbr:nberwo:18754

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  1. Demurger, Sylvie, 2001. "Infrastructure Development and Economic Growth: An Explanation for Regional Disparities in China?," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 95-117, March.
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  6. Siqi Zheng & Jing Cao & Matthew E. Kahn, 2011. "China's Rising Demand for "Green Cities": Evidence from Cross-City Real Estate Price Hedonics," NBER Working Papers 16992, National Bureau of Economic Research, Inc.
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