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Growth vs. sustainability: Economic development and environmental governance in transition periods policy

Author

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  • You, Chen
  • Chen, Sijin
  • Wang, Heer

Abstract

Although transition period policies are common in government reforms, their economic and environmental effects remain underexplored. From the perspective of time-bound decentralization, we argue that setting a transition period (STP) creates a paradox: it promotes economic growth while worsening air pollution. Using China's county–city merger reform from 2000 to 2022 as a quasiexperiment, this study investigates how STP influences economic development and environmental outcomes. The results show that counties with STP policies experience both faster economic growth and higher air pollution compared with those without STP. These findings remain robust across multiple validation tests. Mechanism analysis identifies resource allocation, enterprise selection, and land development as key transmission channels, while geographic conditions, policy status, and industrial foundations further shape outcomes. We conclude that additional regulatory safeguards within STP policies are essential to balance economic expansion with environmental protection.

Suggested Citation

  • You, Chen & Chen, Sijin & Wang, Heer, 2026. "Growth vs. sustainability: Economic development and environmental governance in transition periods policy," Economic Modelling, Elsevier, vol. 156(C).
    • Handle: RePEc:eee:ecmode:v:156:y:2026:i:c:s0264999325004286
    DOI: 10.1016/j.econmod.2025.107433
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    Keywords

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    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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