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Is economic rebalancing toward consumption “greener”? Evidence from visibility in China, 1984–2006

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  • Li, Zhigang
  • Yuan, Jia
  • Song, Frank
  • Wei, Shangjin

Abstract

The Chinese government has adopted a rebalancing strategy since 2011, shifting from an investment- to consumption-oriented growth model. An aim of this reform is for a “greener” development mode, but relevant empirical evidence is slim. In this study, we propose an innovative methodology to shed light on the environmental externalities of economic rebalancing. First, we use air visibility across China to reflect air quality during 1984–2006. Second, with the daily visibility data, we propose a weekend-effect regression model to difference out city-specific unobserved heterogeneity. Third, we approximate local consumption intensity with the portion of the residential electricity usage in the total electricity usage. To our surprise, the estimates suggest that the pollution intensity of consumption activities has not only been significant, but also exceeded that of production since the mid-1990s. Hence, rebalancing toward consumption is not necessarily more environmentally friendly according to the recent development experience of China.

Suggested Citation

  • Li, Zhigang & Yuan, Jia & Song, Frank & Wei, Shangjin, 2014. "Is economic rebalancing toward consumption “greener”? Evidence from visibility in China, 1984–2006," Journal of Comparative Economics, Elsevier, vol. 42(4), pages 1021-1032.
    • Handle: RePEc:eee:jcecon:v:42:y:2014:i:4:p:1021-1032
    DOI: 10.1016/j.jce.2014.06.003
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    Cited by:

    1. Li, Zhigang & Xu, Nan & Yuan, Jia, 2015. "New evidence on trade-environment linkage via air visibility," Economics Letters, Elsevier, vol. 128(C), pages 72-74.
    2. Zhou, Peng & Song, Frank M. & Huang, Xiaoqi, 2023. "Environmental regulations and firms' green innovations: Transforming pressure into incentives," International Review of Financial Analysis, Elsevier, vol. 86(C).
    3. Li, Shaoshuai & Li, Zhigang & Ni, Jinlan & Yuan, Jia, 2023. "Growing pains for others: Using holidays to identify the pollution spillover between China and South Korea," China Economic Review, Elsevier, vol. 77(C).
    4. Biggeri, Mario & Bortolotti, Luca & Saccone, Donatella & Tassinari, Mattia, 2023. "Policy and political challenges for a better world: The United States and China pathways towards the 2030 Agenda," Ecological Economics, Elsevier, vol. 209(C).

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    More about this item

    Keywords

    Rebalancing; Environment; China;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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